Oct. 16 (Bloomberg) -- International demand for long-term U.S. financial assets in August grew as investors sought Treasuries and shunned debt issued by Fannie Mae, Freddie Mac and other agencies.

Total net purchases of long-term equities, notes and bonds rose to a net $14 billion from $8.6 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 sold a net $400 million, compared with net sales of $33.6 billion a month earlier.

Private investors abroad purchased the most U.S. government debt since April and sold agency securities -- those issued by government-sponsored enterprises -- for a second straight month. Net selling of U.S. corporate debt was the most since at least April 2004.

``We aren't surprised by the recent drop in U.S. agency holdings by foreigners given the GSE troubles, and that trend could continue,'' said Win Thin, senior currency strategist and Brown Brothers Harriman & Co. in New York. Still, the higher U.S. Treasury buying ``supports our view that foreigners will continue to buy dollar-denominated assets,'' he said.

Economists predicted international investors would buy a net $30 billion of long-term securities in August, based on the median of five estimates in a Bloomberg News survey.

Foreign demand for U.S. agency debt from companies such as Fannie and Freddie remained weak from a month earlier. Sales of long-term agency debt totaled a net $29.5 billion, compared with net sales of $49.9 billion in July.

GSE Takeover

Treasury Secretary Henry Paulson on Sept. 7 announced plans for the government to seize control of Fannie and Freddie, the two largest sources of U.S. mortgage financing. At the time they were put into the conservatorship, Fannie and Freddie owned or guaranteed almost half of the $12 trillion in American home loans.

International sales of U.S. stocks totaled a net $982 million, compared with net sales of $5.8 billion in July. Foreigners sold a net $13.1 billion of corporate bonds, compared with net sales of $4.2 billion a month earlier.

Net purchases of Treasury notes and bonds increased to $34.8 billion, compared with $34.3 billion a month earlier. Net foreign official buying of Treasury bonds and notes totaled a net $4.8 billion, after net purchases of $10.1 billion the previous month.

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.

Japan, U.K.

The dollar rose 4.5 percent in August after a decline in July, according to a trade-weighted index of major currencies. The Standard & Poor's 500 Index rose 1.2 percent in August, after two straight monthly declines and before a 9.1 percent drop in September.

Japan, the largest foreign owner of U.S. Treasury securities, reduced its holdings by $7.5 billion to $585.9 billion. China, the second-largest holder, increased its holdings by $22.3 billion to $541 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 $15.9 billion, bringing holdings to $307.4 billion.

To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net

Last Updated: October 16, 2008 12:28 EDT