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Economy in Brief

Foreign Investors Increase Net Purchases of U.S. Securities in June, But Amount Is Restrained
by Carol Stone August 16, 2010

Foreign participation in U.S. capital markets was relatively modest in June, according to the monthly "TIC" data reported this morning from the U.S. Treasury. Foreign investors were net purchasers of $33.9 billion in long-term domestic securities, up marginally from May, but much less than March and April’s amounts that each exceeded $100 billion. Net purchases of Treasuries in June were $33.2 billion and of federal agency debt, $18.2 billion; foreigners were net sellers of corporate bonds, $13.5 billion, and equities, $4.1 billion. On the other side of these accounts, U.S. investors sold $10.4 billion of foreign securities back to foreign holders, up from a mere $2.4 billion in May and the reverse of net purchases the two months before. Including swap-related transactions and activity in nonmarketable Treasuries, foreign investors made net purchases of $23.5 billion in long-term securities in June, again, up from May, but less than earlier in the year.

Perhaps the more interesting developments come in the flows by country. Chinese investors, for example, were net sellers of U.S. securities in June, by $15.0 billion in total, with $21.2 billion in Treasuries; they bought $5.5 billion in federal agencies and had small net changes in corporate securities. This was the first month since February 2009 when they were net sellers and it was the largest net sales amount on record. Japanese, in contrast, bought $27.7 billion in U.S. securities, including net purchases of all major types of debt and equity; this is among the larger amounts the Japanese have bought in any given month, although it more possibly highlights that they are active traders and move significant amounts in both directions. In looking at the Chinese data, we also note that China’s trade balance has been smaller in most recent months than it had run the prior few years, and their fragmentary balance of payments data so far in 2010 indicates an overall reduced volume of net portfolio investment abroad.

The TIC data are found in Haver’s USINT database. The information there also includes aggregate flows in Treasury bills and other short-term assets as well as banking system data on claims on and liabilities to foreign counterparties.

Net Purchases of Long-Term U.S. Securities (Bil.$) June May April June 2009 Monthly Average
2009 2008 2007
Total 33.9 32.9 110.3 125.4 53.3 34.6 83.8
 Treasuries 33.3 14.9 76.4 100.5 44.9 26.2 16.5
China -15.0 9.2 6.2 26.1 8.2 10.9 9.2
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