By Vincent Del Giudice
Jan. 19 (Bloomberg) -- International demand for long-term U.S. stocks, bonds and financial assets rose in November as private investors purchased a record amount of government securities, a Treasury Department report showed.
Net buying of long-term equities, notes and bonds totaled $126.8 billion for the month, compared with net buying of $19.3 billion in October, the Treasury said in Washington. Including short-term securities such as stock swaps, foreigners purchased a net $26.6 billion in November, compared with net selling of $25.4 billion the previous month.
The economic recovery from the deepest recession since the 1930s and growing corporate profits are making U.S. investments more attractive. Increased demand for U.S. securities by countries such as China, Japan and the U.K. may help keep interest rates low.
“The world is still not a safe place and U.S.-based assets have always stood the test of time during periods of great uncertainty,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The worldwide recession may be technically over, but global investors are not so sure.”
Economists projected investors would purchases a net $27.5 billion of long-term securities in November, according to the median of six estimates in a Bloomberg News survey. The Treasury previously reported total purchases of long-term stocks, notes and bonds were a net $20.7 billion.
Treasuries Fall
Treasuries remained lower after the report, falling for the first time in three days. The yield on the 10-year note rose 3 basis points, or 0.03 percentage point, to 3.71 percent at 10:27 a.m. in New York, according to BGCantor Market data.
The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy home mortgages.
Foreign purchases of Treasury notes and bonds were $118.3 billion in November compared with purchases of $38.9 billion in October. Private investors bought a record net $87.1 billion in Treasury securities. Total purchases, which includes government buying, were the highest since October 2007.
Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac registered net buying of $5.9 billion in November after selling of $5.4 billion.
Net foreign purchases of equities were $9.7 billion in November after net purchases of $10.3 billion in October. Investors sold a net $4.6 billion in U.S. corporate debt in November after selling $844 million in October.
China Holdings
China remained the biggest foreign holder of U.S. Treasuries even after its holdings fell by $9.3 billion to $790 billion. China’s holdings were $76.4 billion higher in November than they were a year earlier, the report showed.
China’s holdings of Treasury bills -- securities sold with a maturity of a year or less -- fell 18 percent to $108.5 billion in November, the lowest since September 2008. China’s holdings of notes and bonds increased 2.4 percent to $681.1 billion, according to Treasury data.
Japan, the second-largest holder, increased its holdings by $11.4 billion to $757 billion.
The U.K.’s holdings of Treasuries jumped $47.4 billion in November to $277.5 billion, the biggest increase since June.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, said the increase in holdings of Treasury securities by the U.K. is probably attributable to rising oil prices.
“The U.K. is a financial center,” Chandler said. “People will probably think it’s OPEC money.”
Dollar Index
China’s central bank in June renewed its call for a new global currency, adding to speculation that the Asian nation will diversify its currency reserves. The Dollar Index, a gauge of its strength against six other major currencies, dropped 1.9 percent in November, the fifth straight decline.
Chinese central banker Zhu Min said in Beijing on Dec. 17 that the dollar is set to weaken further as the U.S. grapples with annual budget deficits in excess of $1 trillion.
“When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken,” Deputy Governor Zhu said.
U.S., Japan
U.S. Treasury Secretary Timothy Geithner and Japanese Finance Minister Naoto Kan agreed Jan. 11 to ensure foreign- exchange rate stability, according to a Japanese Finance Ministry official, who spoke on condition of anonymity because the conversation was private. Natalie Wyeth, a U.S. Treasury spokeswoman, declined to comment on details of the conversation, which was first reported by Kyodo News.
Canada will lead talks of the Group of Seven finance ministers and central bank governors Feb. 5-6 in the remote Arctic outpost of Iqaluit.
U.S., Canadian and some European leaders have said the economic recovery is being slowed by large trade imbalances with Asia, and Canadian Finance Minister Jim Flaherty said the G-7 will discuss ways of encouraging some Asian countries to allow their currencies to trade more freely.
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