Foreigners sell long-term U.S. assets in March: Treasury

NEW YORK Wed May 15, 2013 10:12am EDT

NEW YORK (Reuters) - Foreign investors sold long-dated U.S. securities in March, as Treasuries showed modest inflows after strong buying in previous months, data from the U.S. Treasury showed on Wednesday.

Foreigners sold $13.5 billion of long-term U.S. securities during the month, after selling $13.3 billion in February.

They bought $5.3 billion in Treasuries in March and $2.6 billion the previous month, but that was a significant reduction from inflows of $32.3 billion in January and nearly $30 billion in December.

Most Asian central banks were net sellers of Treasuries for the month, including China, Japan, Taiwan, Singapore and India.

"There was clearly less appetite for U.S. assets in the month of March and was probably due to the fact that the U.S. economy had a soft patch during that month," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"U.S. Treasury buying was significantly lighter from the previous months and that has affected the overall picture."

The yield on benchmark 10-year Treasuries rose to as high as 2.087 percent in March. U.S. economic data were in general mixed during the month, but there was already talk that the Federal Reserve could wind down asset purchases later in the year, prompting investors to reach for higher-yielding assets.

Exacerbating the U.S. flows picture was aggressive buying of overseas stocks by Americans searching for higher returns. In March, U.S. investors bought $26.8 billion in stocks after buying $18.6 billion in February and $21.7 billion in January.

Including short-dated assets such as bills, overseas investors bought a net $2.1 billion in March, compared with upwardly revised inflows of $61.9 billion the previous month.

China, the largest foreign creditor, reduced its Treasury holdings to $1.2505 trillion, while Japan trimmed holdings to $1.1050 trillion.

Japan's central bank in April started an aggressive stimulus program that will inject some $1.4 trillion into the Japanese economy in less than two years. Analysts expect that to keep the yen weak and push down Japanese bond yields, spurring more Japanese purchases of U.S. assets.

U.S. stocks, meanwhile, showed inflows of $6.8 billion in March after outflows of $2 billion the prior month, while agencies saw buying of $9.5 billion, and purchases of $2 billion in February.

Demand for U.S. corporate bonds, however, eased, with outflows of $6.2 billion, compared with net inflows of $9.6 billion in February.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by James Dalgleish)

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