Foreign Demand for U.S. Assets Slows on Treasuries, Agency Sales

International purchases of U.S. stocks, bonds and other financial assets slowed for the first time in four months in January as private investors sold Treasuries and agency bonds during the stock market’s best month in more than a year.

Net buying of long-term financial assets totaled $25.7 billion during the month, down from net purchases of $64.2 billion in December, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $40 billion of long-term assets, according to the median estimate.

“Private investors have a greater appetite for risk because there is more clarity in fiscal policy in January,” Thomas Simons, a government debt economist at Jefferies Group Inc. in New York said. “Judging by the stock market trend and better global financial market conditions, we are likely to see more outflows from Treasuries by private investors.”

European stocks rose to an almost five-year high this week as policy makers gathered for a two-day summit in Brussels. The U.S. continues to remain attractive as the Dow Jones Industrial Average extended the longest rally since 1996 yesterday. The House of Representatives broke a year-long impasse over how to head off $600 billion in tax increases and spending cuts that had been scheduled to begin taking effect on Jan. 1.

The Dow gained 5.8 percent in January, its biggest monthly advance since October 2011.

Including short-term securities such as stock swaps, foreigners bought a net $110.9 billion in January, up from net purchases of $22.2 billion the previous month.

China Purchases

China remained the biggest foreign owner of U.S. Treasuries in January after its holdings rose $44.1 billion to $1.26 trillion, according to the Treasury. Japan, the second-largest holder, was little changed at $1.1 trillion in holdings.

Net sales by private investors in Treasury notes and bonds totaled $20.8 billion and agency selling amounted to $900 million, the report showed. Official purchases of U.S. notes and bonds totaled $53.1 billion, compared with $8.4 billion the previous month, it showed.

Foreigners bought a net $32.3 billion of Treasuries in January, according to today’s report, up from $29.9 billion the month before.

Estimates of foreign transactions in long-term U.S. assets in January ranged from net buying of $25 billion to $45 billion, according to five economists surveyed by Bloomberg before the report.

To contact the reporter on this story: Meera Louis in Washington at mlouis1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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