NEW YORK |
(Reuters) - Foreigners stepped up buying of long-dated U.S. securities in April for the first time in five months but demand for U.S. government debt declined, U.S. Treasury Department data showed on Wednesday.
The United States attracted a net long-term capital inflow of $30.6 billion in April, up from a $24 billion inflow the prior month, the data showed. That was the first monthly increase in net foreign buying since November.
Foreigners bought Treasuries in April but the total net inflow fell by $3.4 billion to $23.3 billion, the fifth consecutive monthly decline. The slide was driven by private foreign investors, who turned their backs on Treasuries in April and sold a net $751 million.
Some analysts said reduced private demand for Treasuries may reflect concern over U.S. public finances. The U.S. government budget gap is expected to hit $1.4 trillion this year and stay in the trillion-dollar range for several years.
"Growing concern over the U.S. fiscal deficit appears to be causing foreign investors to sell long-dated U.S. Treasuries and buy shorter-dated securities and deposits," said BNY Mellon strategist Michael Woolfolk.
In April ratings agency Standard & Poor's put a negative outlook on the United States' top-notch credit rating and warned there is at least a one-in-three chance it could cut the rating if lawmakers cannot agree on a way to reduce the deficit.
The White House and Congress are at odds over how to do that. Congress needs to raise the government's legal borrowing limit by August and Republican leaders have threatened not to increase it unless the Obama administration agrees to deep spending cuts.
CENTRAL BANK STILL BUYING TREASURIES
Official foreign investors, including central banks, made up for the lack of private Treasury demand and bought a net $24.4 billion in April, their biggest monthly total in 2011.
That interrupted a recent trend in which private investors have been steadier buyers of U.S. government notes and bonds than official ones.
China, the largest foreign U.S. creditor, increased its overall Treasury holdings by $7.6 billion to $1.153 trillion.
Including short-dated assets such as Treasury bills, foreigners bought a net of $68.2 billion in April, the data showed. That was down from an upwardly revised $127.1 billion inflow in March.
Low U.S. interest rates also increased the appeal of equities, with foreigners snapping up a net $17.8 billion in April. Of that inflow, $16.6 billion came from private buyers.
U.S. investors bought a net $12.9 billion in foreign equities. "Amid a continued rally in risky assets this year, U.S. investors have been increasingly moving money overseas in search of higher yields," Woolfolk said.
No comments:
Post a Comment