Mixed Signals from Treasury-Reported Capital Flows
January 18, 2011
Foreigners bought a net $93.9 billion of US. securities in November, the most since August and 67.1% greater than the October total. November’s purchases were also greater than the monthly averages of $78.3 billion bought during the last twelve months and $48.3 billion over the 12 months to November 2009. Treasury securities accounted for roughly two-thirds of all U.S. securities bought by foreigners in November. Net of U.S. purchases of foreign securities, there was a net inflow in November of $85.1 billion, almost three times larger than October’s $28.9 billion and larger than September’s inflow of $75.5 billion. Using a broader definition of long-term flows that includes swaps, the inflow in November was $64.6 billion, still comfortably bigger than that month’s goods and services trade deficit of $38.3 billion.
The distribution of foreign buying of Treasuries continues to give troubling evidence that China and Opec are diversifying away from U.S. federal debt. Chinese holdings of Treasuries fell by $11.2 billion in the latest month and were $33.4 billion lower than a year earlier. Opec holding fell by $3.5 billion in November and were just $7.8 billion greater than in November 2009. The biggest regional source of demand for Treasuries is currently the U.K., whose holdings rose by more than $30 billion in November and $356.3 billion during the past twelve reported months.
Another worrisome sign for the dollar was that the broadest measure of net capital inflows reported by the Treasury, which includes short-term instruments, showed a net inflow in November of $39.0 billion, barely enough to cover the trade deficit, and its average net inflow over the past twelve months of $24.8 billion per month was not as big as the trade imbalance.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
Tags: TIC data
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