By Gertrude Chavez-Dreyfuss
NEW YORK Feb 18 Foreigners sold long-dated U.S.
securities for a second straight month in December, selling
almost all asset classes except Treasuries, data from the U.S.
Treasury showed on Tuesday.
U.S. Treasuries posted a net inflow of $17.9 billion in the
month after sales of $127 million in November. However, all the
other assets showed outflows.
Overseas investors sold equities to the tune of $13.7
billion, up from sales of $7.9 billion the previous month.
Agency debt also sold off, with outflows of $15.4 billion, while
corporate bond outflows amounted to $7.5 billion.
"The U.S. has been struggling to attract sufficient foreign
investments to offset U.S. investments in foreign securities,"
said Michael Woolfolk, global market strategist at BNY Mellon in
"This has uncovered the deficit in the U.S. current account
and the U.S. net foreign direct investment positions leading to
a balance of payments deficit and ultimately a weaker dollar."
In total, foreigners sold $45.9 billion in long-term U.S.
assets in December, compared with outflows of $28.05 billion the
Including short-dated assets such as bills, overseas
investors sold $119.6 billion, compared with outflows of $13
billion the prior month.
The yield on the benchmark 10-year Treasury note
rose to a high of 3.03 percent in December, a month in which
investors sold U.S. government bonds as the Federal Reserve
announced a gradual reduction in its bond-buying plan.
The dollar, on the other hand, fell 0.8 percent in December
against a basket of currencies.
China's holdings of U.S. Treasuries declined $47.8 billion
to $1.268 trillion in December.
"My impression is that China's buying of U.S. Treasuries has
been severely curtailed since the United States was downgraded
in August 2011," BNY's Woolfolk said. "If this continues, then
this has implications for both Treasury yields and the dollar."
Japan remains the second-largest holders of U.S. Treasuries,
with $1.18 trillion, flat from levels in November.
Japan's central bank is in the midst of an aggressive
stimulus program. Analysts expect Japan's quantitative easing to
keep the yen weak and push down Japanese bond yields,
thus prompting more Japanese purchases of U.S. assets.