February 15, 2018 / 10:15 PM / 6 months ago

UPDATE 1-Foreigners sold Treasuries for 3rd month in December -data

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By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 15 (Reuters) - Foreigners sold Treasuries for a third straight month in December, data from the U.S. Treasury Department showed on Thursday, as investors started to price in a faster pace of interest rate increases by the Federal Reserve.

Foreign investors sold Treasuries in seven of the last 12 months, with outflows of $15.96 billion in December from $18.82 billion the previous month.

The sell-off contributed to the rise in yields in 2017. From a low of 2.334 percent in January 2017, yields ended up at 2.504 percent at the end of December, or a nearly 20-basis point rise.

Late on Thursday, U.S. benchmark Treasury 10-year yields were at 2.904 percent

This year, Treasuries have been sold off sharply, as expectations of four interest rate increases ramped up in the wake of rising inflation concerns. Wednesday’s core U.S. inflation data showed the biggest increase since January 2017.

Inflation worries have helped boost U.S. 10-year yields by 50 basis points so far this year, analysts said.

“The quarterly annualized rate of inflation is now running close to 2.9 percent, which supports the possibility of four Fed rate hikes this year,” said asset manager Invesco in a blog.

Data also showed that China increased its holdings of Treasuries in December to $1.184 trillion, from $1.176 trillion in November. So far, China has added roughly $133 billion in Treasuries since the beginning of the year, data showed, buying the U.S. asset for most of the year except for three months.

Japan was the second-largest non-U.S. holder of Treasuries, with $1.061 trillion in December. Its holdings of the U.S. asset have fallen for five straight months,

Global central banks overall reduced their holdings of Treasuries to $6.310 trillion in December, from $6.333 trillion the previous month.

U.S. stocks, meanwhile, saw inflows of $35.06 billion in December, with foreigner’s buying American equities for four straight months. The inflows were in line with record levels for U.S. stocks indexes last year.

Overall, foreigners bought long-term U.S. securities for a sixth straight month in December, purchasing $27.3 billion in long-term U.S assets after buying $57.5 billion in November. Including shorter-dated securities, however, overseas investors sold $119.3 billion in December, after buying $33.5 billion the previous month.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith Mazzilli and Susan Thomas

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