2nd UPDATE:May Net Foreign Sales Of Long-Term US Securities $37.2 Billion
July 16 2009 - 3:46PM
Dow Jones News
Despite $37.2 billion in net foreign sales of long-maturity U.S.
securities in May, foreign investors appear to be showing a
stronger appetite for some U.S. investments, according to a
Treasury Department report Thursday.
Foreigners purchased $16.8 billion in U.S. stocks in May, the
highest level since the recession officially began in December
2007.
Meanwhile, China's holdings of U.S. Treasury securities grew in
May despite intensifying talk of a shift away from the dollar as
the global reserve currency.
"As of yet, we have not seen a sustained move in terms of
dollar-denominated assets being shed," Dan Greenhaus of Miller
Tabak & Co. wrote in a client note following the release of the
data.
The Treasury Dept. report showed net foreign sales of
long-maturity U.S. securities totaled $37.2 billion in May,
following sales of $8.5 billion the month before.
"The bottom line is that the overall situation in terms of
capital flows looks manageable, and we are not looking at any
dramatic or unhealthy shifts that would be a source of concern for
the U.S. dollar," IHS Global Insight Chief U.S. Economist Brian
Bethune wrote.
The monthly Treasury report highlights cross-border acquisitions
of securities with maturities of more than one year including
non-market transactions such as stock swaps and principal repayment
on asset-backed securities.
The closely-watched figure, excluding transactions that don't
occur on an open market, recorded net sales of $19.8 billion in
long-term U.S. securities, after purchases of $11.5 billion in
April, according to the monthly Treasury International Capital
report, known as TIC. The report's most comprehensive category,
"monthly net TIC flows," includes non-market flows, short-term
securities and changes in banks' dollar holdings. This measure of
net foreign capital outflow was $66.6 billion in May, versus an
outflow of $38.0 billion the previous month.
"These shifts may lead to some modest downward pressure on the
U.S. dollar, but the recent improvement in the U.S. trade deficit
substantially reduces net overseas financial requirements, while
foreign private demand for U.S. corporate bonds and equities is
picking up in response to recent positive earnings reports,"
Bethune wrote.
Financial market analysts consider the monthly data from the
Treasury Department to be a significant but imprecise gauge of how
easily the U.S. can finance its trade deficit. The May TIC flow
compares with the $25.96 billion trade deficit during the
month.
Within the long-term securities category, foreign net sales of
U.S. Treasury notes and bonds totaled $22.55 billion in May,
compared with net purchases of $41.89 billion the month before.
Private foreign investors sold a net $343 million in Treasury
notes and bonds in May, after buying $24.79 billion in April.
Meanwhile, foreign official institutions such as central banks sold
a net $21.76 billion of these Treasurys, compared with net
purchases of $17.13 billion the month before.
The sales likely indicate maturing securities and not a
sustained shift away from Treasury securities, Wells Fargo wrote in
a client note.
Net foreign purchases of debt issued by U.S.
government-sponsored agencies like Fannie Mae (FNM) and Freddie Mac
(FRE) totaled $12.81 billion in May, compared with sales of $2.48
billion in April.
For U.S. equities, net foreign purchases totaled $16.73 billion
in May, compared with purchases of $4.58 billion the previous
month.
For corporate bonds, net foreign purchases were $935 million,
versus sales totaling $9.73 billion the previous month.
China remained the largest holder of U.S. Treasury securities,
having surpassed Japan late last year. China increased its holdings
to $801.5 billion in May. Japan, the second-largest holder of U.S.
Treasurys, decreased its holdings to $677.2 billion.
The TIC data, typically released around the 11th business day of
the month, can be found on the Treasury's Web site at:
http://www.treas.gov/tic. With each monthly release, Treasury
revises the previous month's data as well.
The next report, covering June, is scheduled for release on Aug
17.
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-9275;
Meena.Thiruvengadam@DowJones.com