Net Foreign Purchases of U.S. Assets Up $115.1 Billion in April
By Rebecca Christie
June 16 (Bloomberg) -- Foreign buying of U.S. financial assets rose more than forecast in April to an 11-month high as investors snapped up Treasuries and corporate debt.
Total holdings of equities, notes and bonds increased by a net $115.1 billion, from $79.6 billion the previous month, the Treasury Department said today in Washington. Including short- term securities such as Treasury bills and non-market trades such as stock swaps, foreigners bought a net $60.6 billion, compared with net sales of $48.7 billion a month earlier.
After the near-collapse of Bear Stearns Cos., which necessitated a Federal Reserve-engineered rescue of the Wall Street firm, the report indicates private investors regained confidence in U.S. assets. The Fed continued to lower interest rates in April to ease a credit crunch and boost growth, stoking investor demand for U.S. government debt.
``Foreign investors fled U.S. money markets in March as concerns about bank counterparty risk spiked,'' said Zach Pandl, an economist at Lehman Brothers Holdings Inc., before the report. ``The significant improvement in market conditions since then likely encouraged flows to return.''
Economists predicted international investors would buy a net $63.3 billion of long-term securities in April, based on the median of 10 estimates in a Bloomberg News survey, down from a previously reported gain of $80.4 in March. Including short-term securities, total net purchases were forecast to be $42.5 billion, according to the median of four estimates.
Purchases of all U.S. financial assets by foreign governments totaled $41.3 billion after a $48.1 billion net gain in March, the report showed. Total purchases of Treasuries increased a net $80.3 billion, compared with a net gain of $53.6 billion in March.
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 mortgages.
The U.S. dollar rose 0.2 percent in April, according to the Federal Reserve trade-weighted index of the currency, the first monthly advance since December. Today's report showed international demand for Treasuries increased by $3.3 billion in April, compared with a gain of $27.8 billion in March. Official purchases of Treasuries rose by $13.8 billion, after net sales of $3 billion the previous month.
The yield on the benchmark 10-year note averaged 3.64 percent in April, compared with 3.48 percent the previous month. Holdings of Fannie Mae, Freddie Mac, and other so-called agency debt rose a net $15.3 billion after an $18.7 billion net gain in February.
International sales of U.S. stocks totaled a net $15.9 billion, compared with net purchases of $10.8 billion in March. The Standard & Poor's 500 Index rose 4.8 percent in April, the first increase since October. The Dow Jones Industrial average was up 4.5 percent in April, the biggest monthly increase in a year. U.S. investors bought a net $10.3 billion of overseas assets in April, after purchases of a net $1.1 billion the month before. Private investors bought a net $63.5 billion in long-term securities, compared with a net $30.5 billion in March. Foreigners accumulated a net $25.1 billion of corporate bonds, compared with net sales of $4.6 billion a month earlier.
Some economists say the difference between the trade gap and securities purchased by foreigners is an indicator of how easily the U.S. can finance its external obligations. The U.S. trade deficit widened in April, to $60.9 billion, more than the $60 billion economists had predicted, from $56.5 billion in the previous month.
Japan, the largest foreign owner of U.S. Treasury securities, decreased its holdings by $8.5 billion to $592.2 billion. China, the second-largest holder, increased its holdings by $11.4 billion to $502 billion, the Treasury said. The U.K., which through London acts as a transit point for international investors, especially those in the Middle East, bought a net $48.5 billion, bringing holdings to $251.4 billion.
To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net