By Agency Reporter

Wednesday, 16 Feb 2011

Global demand for United States stocks, bonds and other financial assets fell in December from a month earlier, the Treasury Department reported.

Bloomberg News reported on Tuesday, that net buying of long-term equities, notes and bonds totaled $65.9bn during the month compared with net buying of $85.1bn in November, according to data released in Washington.

Including short-term securities such as bills and stock swaps, foreigners purchased a net $48.2bn compared with net buying of $35.6bn the previous month.

The economy has been slow to recover from the longest recession since the 1930s, stymied by continued weakness in the housing market as well as unemployment at nine per cent in January and a budget deficit projected by the Obama administration to be $1.6tn this fiscal year.

“Treasury yields in the US went up tremendously in December spurring big losses for foreign bondholders,” the chief financial economist at Bank of Tokyo-UFJ in New York, Mr. Chris Rupkey, said earlier. “The rise in yields curbed global investor enthusiasm,” he added.

The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by US agencies such as Fannie Mae and Freddie Mac, which buy home mortgages.

Before Tuesday’s report was issued by the Treasury, economists in a Bloomberg News survey projected a median of $40bn of net purchases of long-term US financial assets in December. Five economists participated in the survey, and their estimates ranged from $10bn to $66bn.

Total foreign purchases of Treasury notes and bonds were $54.6bn in December compared with purchases of $61.7bn in November. Foreign demand for US agency debt from companies such as Fannie Mae and Freddie Mac registered net buying of $9.4bn in December after buying of $14.2bn in November.

Net foreign purchases of equities were $10.2bn in December after net purchases of $13.2bn in November. Investors purchased a net $2.6bn in US corporate debt in December after buying $4.7bnn in November.

China, the biggest foreign holder of US Treasuries, saw its portfolio fall to $891.6bn from $895.6bn in December. Japan, the second-largest holder, increased its holdings from $883.6bn to $877.2 billion in December. The United Kingdom increased its holdings to $541.3bn from $511.8bn in December, and Hong Kong, counted separately from China, reduced its holdings to $138.2bn from $138.9bn.

Regarding China, a senior Treasury official said the Obama administration isn’t satisfied with the country’s progress in strengthening the yuan and is “intensely focused” on the issue.

“We’ve made progress on the currency issue but that does not mean we are satisfied,” Lael Brainard, the Treasury’s undersecretary for international affairs, said in a February 10 speech to the US-China Business Council in Washington.

In a report to Congress on February 5, the Treasury said China had made “insufficient” progress in allowing its currency to rise, however, the report declined to brand China a currency manipulator.

 

Source: Punch