Bloomberg News

International Demand for U.S. Assets Rises Above Forecast

March 15, 2012

International demand for U.S. financial assets rose more than forecast in January as investors sought a haven from the debt crisis in Europe.

Net buying of long-term equities, notes and bonds totaled $101 billion during the month, compared with net purchases of $19.1 billion in December, the Treasury Department said today in Washington. Six economists surveyed by Bloomberg News had forecast net buying of $38.5 billion of long-term assets, according to the median estimate.

“The surge in foreign demand for U.S. financial assets underscores the healthy appetite that continues to prevail globally for U.S. securities,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said. “Treasuries demand was especially strong, reflecting the appeal of this ‘safe haven’ asset to global investors even at a time when risk appetite was improving.”

U.S. assets maintained their attraction in January, as European leaders struggled to contain their debt crisis that started in Greece, Portugal and Ireland. Global risks posed by the European crisis diminished after euro area members this week approved a second bailout for Greece.

The report showed that net foreign purchases of U.S. Treasuries totaled almost $83 billion in January, compared with net selling of $14.9 billion the month before.

Custodial Survey

The Treasury said last month it was shifting from a transaction-based survey to a custodial survey to keep track of foreigners’ holdings. As a result, month-to-month comparisons are invalid.

The department, in an explanatory note to its report, said that while its data “provide a window into foreign ownership of U.S. Treasury securities” based primarily on the custodial data, they do not provide “complete accuracy.”

“For example, if a U.S. Treasury security purchased by a foreign resident is held in a custodial account in a third country, the true ownership of the security will not be reflected in the data,” the department said.

China remained the biggest foreign owner of U.S. Treasuries in January after its holdings rose $7.6 billion to $1.16 trillion, according to the Treasury’s statistics.

Hong Kong, which is counted separately from China, increased its holdings by $8.6 billion to $130.3 billion.

Japan, the second-largest holder of U.S. Treasuries increased its holdings in January by $20.8 billion to $1.08 trillion, reaching a record since data were first compiled in 1994.

Including short-term securities such as stock swaps, foreigners bought a net $18.8 billion in January, compared with net buying of $95.2 billion the previous month.

The Treasury Department’s data capture international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies.

To contact the reporter 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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