CORRECTED-(OFFICIAL)-UPDATE 1-Foreign demand for U.S. Treasuries slides in January

Tue Mar 18, 2014 12:25pm EDT

(Corrects Treasury holdings of China, Japan, Caribbean, Luxembourg in paragraphs 10, 12, 13 after U.S. Treasury Dept revised data)

* Foreign official investors sell Treasuries

* Foreigners sell U.S. stocks, corporates, agencies

By Gertrude Chavez-Dreyfuss

NEW YORK, March 18 (Reuters) - Demand for U.S. Treasury securities weakened in January, as foreign central banks and other official investors sold for a second straight month, data from the U.S. Treasury showed on Tuesday.

U.S. Treasuries saw an outflow of $571 million, from an inflow of $17.9 billion in December. Foreign official institutions sold $16.7 billion in January and $11.9 billion in December.

But the Treasury market saw healthy demand from "other foreigners", believed to be private investors, which bought $17.2 billion two months ago.

The outflow in U.S. Treasuries in January was a big surprise for many investors since benchmark 10-year notes had their best monthly performance since mid-2012. The month started with 10-year yields at 3.038 percent, and it ended with 2.666 percent.

Overall, demand for long-term U.S. assets was a lackluster $7.3 billion inflow, compared with sales of $45.9 billion in December. Analysts said markets were expecting $40 billion in long-term inflow in January.

Excluding swaps and other adjustments, foreigners sold $2.5 billion in long-term U.S. securities in January compared with revised outflows of $51.1 billion the previous month.

"The U.S. has struggled to attract investments since February," of last year said Michael Woolfolk, senior market strategist at BNY Mellon in New York.

Including short-dated assets such as bills, overseas investors bought $83 billion in January, from revised outflows of $126.7 billion in December.

"No one really looks at short-dated assets, because there's a lot of volatility," Woolfolk said.

China remains the largest holder of U.S. Treasuries, showing a slight increase to $1.274 trillion in January from $1.270 trillion in December.

Woolfolk said the slight increase in Chinese holdings of U.S. Treasuries was not significant. "The two-month moving average of China's holdings is still a downtrend. The Chinese have not been investing in U.S. Treasuries at the level they had in the past."

Japan's holdings grew a little to $1.201 trillion in January, from $1.183 trillion the previous month.

Holdings of Caribbean Banking Centers - known to be money centers for hedge funds - showed a slight decline to $293.3 billion from $294.3 billion the previous month. On the other hand, holdings of Luxembourg, another money center for hedge funds, grew to $135.3 billion from $134.4 billion.

Foreigners also sold other U.S. assets. U.S. stocks saw an outflow of $5.8 billion, from net sales of $13.7 billion in December.

Agencies were also sold off, with outflows of $4.0 billion in January, from foreign net selling of $15.4 billion the previous month.

Overseas investors also sold corporate bonds to the tune of $4.4 billion, from outflows of $7.5 billion in January. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
robertsgt40 wrote:
This is too rich. For the real scoop slide over to zerohedge. Just too funny.

Mar 18, 2014 3:16pm EDT  --  Report as abuse
robertsgt40 wrote:
Zero comments? Suuuure

Mar 18, 2014 3:17pm EDT  --  Report as abuse
magronep wrote:
In 2013, the Privately Owned “Federal Reserve” Corpoartion purchased rougly 70% of all issued treasury bonds. It would seem to me that foreign demand for U.S. Government debt is rather low. Forcing the American Populace to open a MyRA account could be quite bulling for Treasury Bonds.

Mar 18, 2014 3:47pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.