Foreigners less keen on U.S. assets in August: U.S. Treasury

NEW YORK Tue Oct 22, 2013 10:06am EDT

NEW YORK (Reuters) - Foreigners soured on long-term U.S. securities in August, shedding both stocks and government bonds, and China's Treasury holdings fell to a six-month low, U.S. Treasury data showed on Tuesday.

Overseas holdings of long-term U.S. securities decreased by $8.9 billion in August. Those holdings had increased by $30.9 billion in July.

Foreign Treasuries' holdings fell by $10.8 billion in August. China, the largest foreign U.S. creditor, saw its holdings decline $11.2 billion to $1.268 trillion.

The decline came a month before the Federal Reserve decided not to slow its massive monetary stimulus, which includes monthly purchases of government and mortgage-backed bonds.

Foreigners soured on long-term U.S. securities in August, shedding both stocks and government bonds.

China's Treasury purchases have slowed in recent years, a trend that is likely to continue, said BNY Mellon currency strategist Michael Woolfolk.

He said the recent U.S. government shutdown and debate over raising the debt ceiling have made overseas investors even more wary of U.S. assets, as has fear about the strength of the U.S. economy and doubts about when the Fed will wind down stimulus.

U.S. employers added a fewer-than-expected 148,000 jobs in September, data on Tuesday showed, and economists fear a 16-day government shutdown will shave anywhere from a half to a full percentage point from fourth-quarter growth.

"It's all leading central banks at least to wonder whether having 60 percent of their foreign exchange reserves in dollars is too high given the low yields available on U.S. Treasuries and all the other risk," Woolfolk added.

Japan, the second largest foreign U.S. creditor, increased Treasury holdings by $13.7 billion in August to $1.149 trillion.

Foreign holdings of U.S. stocks also fell in August by $16.9 billion, but bonds issued or guaranteed by federal home financing agencies remained in demand, with holding rising by $16.8 billion in August after climbing $22.2 billion in July.

Including short-dated assets such as bills, overseas investors holdings fell by $2.91 billion in August after rising by $56.7 billion in July.

(Editing by Chizu Nomiyama and W Simon)