Bloomberg News

International Demand for U.S. Assets Cooled in December

February 15, 2012

(Updates with economist quote in third paragraph.)

Feb. 15 (Bloomberg) -- International demand for U.S. financial assets cooled in December as optimism Europe would resolve its debt crisis reduced the appeal of Treasuries as a safe haven.

Net buying of long-term equities, notes and bonds totaled $17.9 billion during the month, compared with net purchases of $61.3 billion the previous month, the Treasury Department said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $87.1 billion in December, compared with net buying of $42.9 billion the previous month.

“Foreign purchases of U.S. assets were less than impressive in December, which appears to be an effect of easing European tensions, particularly later in the month,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

Net foreign sales of Treasury notes and bonds were $16.6 billion in December compared with purchases of $54 billion in November.

U.S. Treasuries

U.S. Treasuries finished 2011 with the biggest annual return since the depths of the financial crisis in 2008 as Europe’s debt turmoil spurred investor demand for refuge, even as Standard & Poor’s cut America’s credit rating. U.S. 10-year note yields ended 2011 within a quarter-percentage point of a record low while data showed the U.S. economy was strengthening.

European leaders are torn between pouring more aid into Greece’s struggling economy or risking an unprecedented national bankruptcy that might force the country out of the euro. A euro- area finance ministers meeting was canceled late yesterday and replaced with a conference call at 5 p.m. Brussels time today. On March 20 Greece must come up with 14.5 billion euros ($19 billion) for a bond redemption or possibly become the first country in the euro’s 13-year history to default.

The Treasury Department data capture international purchases of government notes and bonds, stocks, corporate debt and other securities.

Five economists surveyed by Bloomberg News had estimated net buying of $45 billion of long-term assets, according to the median estimate. Their estimates before the report ranged from net buying of $20 billion in long-term assets to $72 billion.

China remained the biggest foreign holder of U.S. Treasuries in December after its holdings fell by $32 billion to $1.1 trillion. Hong Kong, counted separately from China, increased holdings by $6.7 billion to $112 billion. Japan’s rose by $3.5 billion to $1.04 trillion.

--With assistance from Brian Faler in Washington. Editors: Kevin Costelloe, Christopher Wellisz

To contact the reporters on this story: Meera Louis in Washington at mlouis1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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