Global| Jun 15 2005Foreign Buying of US Securities Moderates, Especially Among Agency Debt
Summary
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 [...]
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 $11.5 billion worth. This parallels the general pattern in the Japanese data that we discussed here last Friday. China's results are a bit surprising. Those investors were moving rapidly into US securities through mid-2003, but since then have slowed their participation. They sharply reduced purchases of both Treasuries and GSEs, while gradually picking up more corporate bonds. These last, however, remain quite modest. Over the last two years, then, the Chinese purchases of US securities have been smaller, even as their trade surplus with the US has continued to widen.
| Net Foreign Purchases of Securities in US Markets (Billions US$) |
Apr 2005 | Mar 2005 | Feb 2005 | Last 12 Months Average | Monthly Average|||
|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2002 | |||||
| Total | 47.4 | 40.6 | 84.1 | 62.5 | 66.3 | 56.1 | 47.9 |
| Treasuries | 24.7 | 27.8 | 42.5 | 25.3 | 29.3 | 23.1 | 10.0 |
| Federal Agencies (mostly "GSEs") | 6.7 | 7.5 | 16.1 | 17.6 | 18.9 | 13.3 | 16.3 |
| US Corporate Bonds | 18.0 | 21.9 | 32.0 | 26.3 | 24.8 | 22.3 | 15.2 |
| US Corporate Stocks | 4.3 | 1.7 | 7.4 | 4.5 | 2.3 | 3.0 | 4.2 |
| Foreign Bonds | -4.6 | -3.9 | 1.4 | -3.2 | -2.1 | 1.6 | 2.4 |
| Foreign Stocks | -1.6 | -14.5 | -15.3 | -8.0 | -7.0 | -7.1 | -0.1 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
More Economy in Brief
