Foreign selling of U.S. Treasuries in April was most since 1978: data

NEW YORK (Reuters) – Foreign investors sold a record amount of U.S. Treasury bonds and notes for the month of April, according to U.S. Treasury Department data on Wednesday, as investors priced in a few more rate increases by the Federal Reserve this year.

Foreigners sold $74.6 billion in U.S. Treasury debt in the month, after purchases of $23.6 billion in March. April’s outflow was the largest since the U.S. Treasury Department started recording Treasury debt transactions in January 1978.

Private offshore investors sold $59.1 billion in U.S. government bonds, while foreign official institutions, which include central banks, sold $12.3 billion.

U.S. economic data in April included a decent non-farm payrolls report for March, along with strong manufacturing as measured by the Institute for Supply Management. That prompted investors to sell Treasuries in April, as did an upswing in risk appetite, with buoyant global stocks and rebounding oil prices.

Yields on U.S. 10-year Treasury notes at the beginning of April were 1.7910 percent, and they hit a high of 1.9410 late in the month.

China remained the largest foreign holder of U.S. government debt, although its holdings in April declined to $1.2443 trillion, from $1.245 trillion in March. U.S. Treasury holdings of the world’s second largest economy declined for a second straight month.

Japan, the No. 2 foreign U.S. Treasury debt holder, posted higher U.S. government debt holdings of $1.143 trillion from $1.137 trillion in March. Japan raised its U.S. Treasury holdings for a fourth straight month.

The report also showed for a second consecutive month U.S. Treasury holdings of Saudi Arabia and other oil-producing countries. Saudi Arabia has the largest Treasury holdings among the Gulf oil exporters with $113.0 billion, down from $116.8 billion the previous month.

Overall, foreign central bank holdings of U.S. Treasuries contracted to $6.239 trillion in April, from $6.287 trillion in March.

Data also showed that foreigners sold long-term U.S. securities in April after buying them for the previous two months.

Offshore investors unloaded $79.6 billion in long-term U.S. assets, after purchasing $78.1 billion the previous month. Including shorter-dated securities, however, overseas investors bought $80.4 billion in April after selling $98.1 billion in March.

U.S. stocks, meanwhile, showed outflows for a third straight month, with foreigners selling $2.8 billion in April from $16.5 billion in March. Foreigners have sold U.S. equities in eight of the last nine months.

Foreign selling of U.S. Treasuries in April was most since 1978: data

Reuters
By Gertrude Chavez-Dreyfuss
June 16,2016