UPDATE 1-Foreigners shun U.S. assets in June; sell Treasuries, corporate bonds

Fri Aug 15, 2014 10:05am EDT

Related Topics

(Adds details, analyst comments)

By Gertrude Chavez-Dreyfuss

NEW YORK Aug 15 (Reuters) - Foreigners sold long-term U.S. securities in June, including U.S. Treasuries and corporate bonds, reversing inflows in the previous month, data from the U.S. Treasury Department showed on Friday.

Net sales of long-term U.S. assets notched $18.7 billion in June following an inflow of $18.6 billion the month before.

Including short-dated assets such as bills, overseas investors sold $153.5 billion in June, after purchases of $33.1 billion in May.

"This is a disappointment and is a negative for the dollar. Clearly, the United States is having a hard time attracting investments to offset its current account deficit," said Michael Woolfolk, global market strategist at BNY Mellon in New York.

Foreign investors also sold $20.8 billion in Treasuries for the month of June, after purchases of $25.0 billion in May.

Ian Lyngen, senior bond analyst at CRT Capital in Stamford, Connecticut said the outflow in Treasuries was led by private investors, who sold a net $36.8 billion in June compared with buying of $4.8 billion in May.

Official flows into Treasuries were a positive $20 billion in June, he said, on top of $19.7 billion in May, and $18.8 billion in April.

China's holdings of U.S. Treasuries declined in June to $1.268 trillion, data showed, still the largest among major foreign holders. Japan's Treasury holding fell to $1.219 trillion.

Investors also sold U.S. corporate bonds for a third straight month. In June, corporate bond outflows totaled $3.6 billion, from sales of $7.8 billion the previous month.

U.S. equities, however, showed an inflow of $2.6 billion, but this was smaller than May's infow of $10.8 billion and April's purchases of $10.2 billion.

BNY Mellon's Woolfolk also said there was some evidence of repatriation by U.S. investors, who sold foreign equities amounting to $12.8 billion.

"This may be an indication of risk aversion as geopolitical tensions were starting to rise in June," Woolfolk said. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama and Meredith Mazzilli)

FILED UNDER: