Global Demand for U.S. Assets Rose $23.6B in May
July 18 (Bloomberg) -- David Stockman, a former budget director in President Ronald Reagan's administration, discusses bipartisan negotiations over raising the U.S. debt limit and reducing the federal deficit. He speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Global demand for U.S. stocks, bonds and other financial assets rose in May from a month earlier as China and Japan added to their holdings of government securities, the Treasury Department reported.
Net buying of long-term equities, notes and bonds totaled $23.6 billion during the month, compared with net buying of $30.6 billion in April, according to statistics issued today in Washington. Including short-term securities such as stock swaps, foreigners sold a net $67.5 billion compared with net buying of $66.6 billion the previous month.
The reporting on long-term securities is a gauge of confidence in U.S. economic policy, and today’s data suggest the country offers safety from the economic crisis in Europe even with the White House and Congress at odds over raising the Treasury’s borrowing authority.
“The U.S. failure to lift the debt ceiling limit has not led America’s creditors to lose confidence yet,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Foreigners continue to buy now, but they may yet get cold feet.”
Economists in a Bloomberg News survey projected long-term U.S. financial assets would show net buying of $40 billion in May. Five economists participated in the survey, and their estimates ranged from $30 billion to $66 billion.
The data capture 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.
China Biggest
China remained the biggest foreign holder of U.S. Treasuries, as its holdings rose by $7.3 billion to $1.16 trillion in May, according to the Treasury’s statistics.
Japan, the second-largest holder, increased its holdings by $5.5 billion to $912.4 billion in May. Hong Kong, counted separately from China, reduced its holdings by $500 million to $121.9 billion.
Total foreign purchases of Treasury notes and bonds were $38 billion in May compared with purchases of $23.3 billion in April.
Foreign selling of U.S. agency debt was a net $8.3 billion in May after purchases of $7.5 billion in April.
Net foreign purchases of equities were $9.3 billion in May after net purchases of $17.8 billion in April.
Investors purchased a net $5.6 billion in U.S. corporate debt in May after selling $3.8 billion in April.
To contact the reporters on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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