August 15, 2013 / 2:15 PM / 6 years ago

UPDATE 1-U.S. Treasuries see record outflow in June

* U.S. net long-term outflow, highest since August 2007

* China, Japan Treasuries sale $40 billion in June

NEW YORK, Aug 15 (Reuters) - Foreign investors sold long-term U.S. securities for a fifth straight month in June, undermined by U.S. Treasury outflows that were the largest on record.

Overseas investors dumped $40.8 billion in U.S. Treasuries during the month, after buying $11.3 billion in May, Treasury department data showed on Thursday.

Michael Woolfolk, global market strategist, at BNY Mellon in New York said the Treasury outflow was the highest since at least 1977 when the U.S. Treasury Department started compiling the data.

Comments from Federal Reserve Chairman Ben Bernanke at a press conference on May 22 that the U.S. central bank could reduce its asset buying program by September fueled a sell-off in U.S. Treasuries.

U.S. 10-year yields hit a high of 2.6670 percent in June after trading in a range of 1.6140 to 2.2350 percent in May. In April, benchmark yields were trading below 2.0 percent.

“The sell-off in Treasuries and Bernanke’s tapering remarks are related,” Woolfolk said. “Lightning doesn’t strike in the same place twice, but Bernanke repeated his comments in June and that roiled the market.”

The data also showed foreigners sold a net $66.9 billion in long-term U.S. securities, including U.S. Treasuries, during the month. That was the largest outflow since August 2007 in the midst of the U.S. mortgage crisis.

Including short-dated assets such as bills, overseas investors sold a net $19 billion in assets in June, compared with inflows of $56.6 billion the previous month.

China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, while Japan further trimmed its holdings to $1.0834 trillion. Japan has pared Treasury holdings for a third straight month.

China and Japan combined accounted for about $40 billion in net Treasury outflows.

U.S. stocks also fell out of favor. Foreigners pulled $26.841 billion out of equities in June after selling $8.62 billion in May.

Foreigners also sold $5.2 billion in U.S. agency debt, after selling $10.3 billion in May.

Demand for corporate bonds also waned, with outflows of $4.98 billion in June after inflows of $7.6 billion in May.

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