Bloomberg News

Foreign Demand for U.S. Assets Slowed on European Easing

April 16, 2012

International demand for U.S. financial assets slowed in February as the European debt crisis showed signs of easing.

Net buying of long-term equities, notes and bonds totaled $10.1 billion during the month, compared with net purchases of $102.4 billion in January, the Treasury Department said today in Washington. Economists surveyed by Bloomberg News projected net buying of $42.5 billion of long-term assets, according to the median estimate.

“I expect some buying of Treasuries; however, not to the same magnitude seen in January,” Kevin Chau, a foreign exchange strategist at IDEAglobal in New York, said before the report. “February was more risk on as riskier assets performed well.” Still, “the European debt crisis will be with us until Europe comes up with a large enough package to boost confidence in the markets. So far, their attempts have been meager.”

China remained the biggest foreign owner of U.S. Treasuries in February after its holdings rose $12.7 billion to $1.18 trillion, according to the Treasury.

Estimates of purchases of long-term assets ranged from net buying of $27 billion to $65 billion, according to six economists surveyed before the report.

Custodial Survey

The Treasury said in February 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.

Japan, the second-largest holder of U.S. Treasuries increased its holdings in February by $13.1 billion to $1.1 trillion.

Hong Kong, which is counted separately from China, increased its holdings by $6.2 billion to $140.5 billion.

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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