November 18, 2019 / 10:28 PM / 2 months ago

UPDATE 1-Foreigners sell U.S. Treasuries, outflows largest since December 2018 -data

(Adds analysts comment, details, byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 18 (Reuters) - Foreigners sold U.S. Treasuries in September, with outflows hitting their largest since December last year, data from the U.S. Treasury department showed on Monday, a move analysts said was consistent with central banks selling dollar assets to support their weak currencies.

Foreign outflows totaled $34.324 billion in September, compared with an outflow of $30.479 billion in the previous month. Overseas investors have sold Treasuries in six of the last nine months.

“It seems like there was decent foreign official selling of Treasuries given some of the broader political volatility that would reflect elements of central bank intervention to support their weakening currencies,” said Jon Hill, vice president, rates strategy, at BMO Capital Markets in New York.

U.S. benchmark 10-year yields started September at 1.466% , rising by about 20 basis points to end the month at 1.673%.

There was a wholesale rally in Treasuries in August as the U.S.-China trade conflict percolated that carried on into September. Analysts said the data suggested demand for Treasuries was led by domestic investors.

The report also showed that Japan’s holdings of Treasuries declined about $29 billion to $1.145 trillion in September from $1.174 trillion in the previous month. Japan though remains the world’s largest non-U.S. holder of Treasuries.

Chinese holdings of U.S. Treasuries also fell in September to $1.102 trillion, sliding for a third straight month. China’s holdings of Treasuries were the lowest since May 2017.

BMO’s Hill said the decline in Chinese holdings was small and suggested Treasuries are not really being used as a weapon in the current U.S.-China trade conflict. China though has been reducing its Treasury securities portfolio for some time.

Overall, foreign holdings of U.S. Treasuries declined in September by $85 billion to $6.776 trillion. That is still more than $500 billion larger than foreign holdings in December.

Data also showed foreigners bought U.S. stocks in September amounting to $8.825 billion, from outflows of $20.987 billion the previous month.

Foreign investors had sold stocks for 13 straight months, from May 2018 to May this year. (Reporting by Gertrude Chavez-Dreyfuss; editing by Diane Craft and Tom Brown)

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