International Demand for U.S. Assets Declined in June
International demand for U.S. financial assets fell in June from the previous month’s inflows, as investors saw Europe’s leaders moving toward a resolution of their financial crisis.
Net buying of long-term equities, notes and bonds totaled $9.3 billion during the month, a drop from net purchases of $55.9 billion in May, the Treasury Department said today in Washington. Economists surveyed by Bloomberg News projected net buying of $40 billion of long-term assets, according to the median estimate.
Including short-term securities such as stock swaps, foreigners bought a net $16.7 billion in June, compared with net purchases of $121.3 billion the previous month. Net foreign purchases of U.S. Treasuries fell to $32.4 billion in June from $45.9 billion the previous month.
“The U.S. was not the safe haven it was earlier in the year for global funds as questions over the sustainability of the U.S. recovery cropped up,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in an e-mail after the report was released. “Credit concerns seemed to be paramount as the selling of corporate bonds has been sizeable.”
U.S. assets have been attractive to investors this year as European Union leaders face a worsening debt crisis. The euro- area economy shrank in the second quarter and tougher budget cuts forced at least six nations into recessions. Gross domestic product in the 17-nation currency bloc fell 0.2 percent from the first quarter, when it stagnated, according to European Union data released yesterday.
Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said purchases of Treasuries in June remained “relatively large” even if net buying of U.S. assets was “fairly modest.”
With the world’s largest economy and deepest financial markets, the U.S. has been a shelter for investors at a time when Europe is struggling to contain its sovereign-debt crisis and Chinese growth is slowing.
Low yields -- 10-year Treasuries fell to a record 1.379 percent on July 25 -- show that most money managers have faith the government will meet its obligations, in spite of a decision by Standard & Poor’s in August 2011 to downgrade U.S. government debt.
Estimates of foreign purchases of long-term U.S. assets in June ranged from net buying of $20 billion to $85 billion, according to six economists surveyed by Bloomberg before the report.
Treasuries fell today, sending 10-year yields to an almost three-month high, on speculation the Federal Reserve will put off more stimulus measures. The 10-year yield rose as much as five basis points to 1.79 percent and was four basis points higher at 10:16 a.m. in New York.
China remained the biggest foreign owner of U.S. Treasuries in June after its holdings rose $300 million to $1.16 trillion, according to the Treasury.
Hong Kong, counted separately from China, lowered its holdings of Treasuries by $8.3 billion to $135.5 billion. Japan’s holdings increased by $10.4 billion to $1.12 trillion.
The Treasury Department’s data capture international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies.
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