Foreigners sold U.S. portfolio assets as China dut Treasuries

Foreign investors were net sellers of U.S. long-term portfolio assets in August as China reduced its holdings of Treasuries to a six-month low.

The net long-term portfolio investment outflow was $8.9 billion after a revised $31 billion inflow in July, the Treasury Department said in a statement today in Washington. Net sales of U.S. equities by official holders abroad were a record $3.1 billion, and China lowered its holdings of U.S. government debt for the second time in three months, the department said.

The Treasury data cover a period before the Federal Reserve opted against reducing its monthly bond buying at a Sept. 17-18 meeting. Since then, a 16-day, partial government shutdown slowed growth and created a pause in economic statistics releases that is expected to delay the Fed’s first tapering until March, according to a Bloomberg News survey of economists.

Today’s report showed China remained the biggest foreign owner of U.S. Treasuries in August even as its holdings dropped $11.2 billion to $1.27 trillion. Japan, the second-largest holder, increased its share by $13.7 billion to $1.15 trillion, the figures showed.

The Treasury’s monthly report on the cross-border flow of portfolio assets captures foreign buying and selling of U.S. securities as well as American investors’ transactions abroad. It also tracks holdings of Treasuries by countries.

The total cross-border outflow in August, including short- term securities such as Treasury bills and stock swaps, was $2.9 billion in August, compared with a net inflow of $56.7 billion the previous month, the report showed today.

Treasuries Selling

Foreign investors, both official and private, were net sellers of $10.8 billion of Treasury notes and bonds in August after net purchases of $33.9 billion the previous month, the report showed.

Net purchases of U.S. agency debt were $16.8 billion after buying of $22.2 billion in July, the Treasury said. Investors were net buyers of $2.4 billion of corporate debt in August after net selling of $922 million the previous month, the report showed.

The Standard & Poor’s 500 Index lost 3.1% in August. Investors in U.S. Treasuries lost 0.7% that month, according to Bloomberg World Bond Indexes. The Bloomberg U.S. Dollar Index, a gauge of the greenback’s value against 10 major currencies weighted by liquidity and trade flows, gained 0.8% in August.

www.bloomberg.com

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