UPDATE 1-Foreign holdings of U.S. Treasuries slide for 4th month in November -data

Foreign holdings of U.S. Treasuries declined for a fourth straight month in November, with Japan reducing its load of U.S. debt for four consecutive months as well, data from the U.S. Treasury department showed on Tuesday.

Foreign investors held $7.053 trillion in U.S. government debt in November, down from $7.068 trillion the previous month.

Japan’s holdings, the largest non-U.S. holder of Treasuries, slipped to $1.260 trillion in November from $1.269 trillion in October.

Ben Jeffery, rates strategist, at BMO in New York, said going forward it would be interesting to monitor Japanese holdings of Treasuries given the weakness of the dollar versus the yen.

“The yield available to Japanese investors when they hedge Treasuries back to yen has become increasingly attractive because of the dollar’s weakness,” he said, which could well prompt them to buy U.S. debt again.

The dollar fell nearly 1% against the yen in November, and for the whole of 2020, the greenback dropped 5%.

For Japanese investors, buying U.S. 10-year debt and hedging back to yen using three-month currency forwards earned a positive return last year, after going negative in 2019 and for nearly three years before that due to higher U.S. interest rates.

Chinese holdings of Treasuries, meanwhile, rose to $1.063 trillion in November from $1.054 trillion in October, the first increase in six months. China remains the second largest non-U.S. owner of U.S. debt.

At the end of November, U.S. benchmark 10-year Treasury yields was at 0.842%, little changed from 0.848% at the beginning of the month.

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On a transaction basis, U.S. Treasuries showed foreign inflows of $9.646 billion in November, from outflows of $20.07 billion in October, from inflows of $22.53 billion in September. U.S. Treasuries posted inflows in six of the last 11 months.

Foreign investors, meanwhile, bought $61.932 billion in U.S. equities in November, from $24.07 billion inflows the previous month. November’s foreign buying of U.S. stocks was the largest since May last year, when equities saw record foreign inflows of $79.7 billion.

Foreign investors have added U.S. stocks for seven straight months.

Data further showed U.S. corporate bonds had a minor net inflow of $867 million in November, from outflows of $21.51 billion in October. Foreigners have sold U.S. corporate bonds in four of the last six months.

Overall, net foreign acquisitions of U.S. long-term and short-term securities, as well as banking flows amounted to a net inflow of $214.1 billion in November, up from a net outflow of $11.1 billion in October. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis and David Gregorio)