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)

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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
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