UPDATE: May Net Foreign Sales Of Long-Term US Secs $37.2 Billion
July 16 2009 - 11:44AM
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, a Treasury department
report released Thursday shows.
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 even amid 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 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 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.
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 and Freddie Mac
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 TICs 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