Net purchases of securities by foreign investors in US markets totaled $47.4 billion in April, somewhat larger than March's $40.6 billion. These last two months, however, are well below recent trends, which generated an average of $62.5 billion over the last 12 months and $66.3 billion for 2004.

This most recent slowdown in net purchases has come mainly in federal agency securities, so-called "GSEs" (government-sponsored enterprises). March and April are the weakest two months since mid-2003, and they represent a general flattening of what had been building momentum in this sector until that time in mid-2003 when financial irregularities at Fannie Mae and Freddie Mac came to the fore. Importantly, and in contrast, the pace of net foreign purchases of US Treasuries has been sustained at about $25 billion a month. Corporate debt purchases have continued to trend higher, as evident in the first graph, which shows 12-month averages of corporate bonds along with the flattening pattern of GSE debt purchases.

Among countries, monthly movements have been erratic. Japanese investors were net sellers of US securities in February and March, but in April, the beginning of their financial year, they came back in for $11.5 billion worth. This parallels the general pattern in the Japanese data that we discussed here last Friday. China's results are a bit surprising. Those investors were moving rapidly into US securities through mid-2003, but since then have slowed their participation. They sharply reduced purchases of both Treasuries and GSEs, while gradually picking up more corporate bonds. These last, however, remain quite modest. Over the last two years, then, the Chinese purchases of US securities have been smaller, even as their trade surplus with the US has continued to widen.