Foreigners again sold long-dated U.S. securities in May, marking four straight months of declines, according to U.S. Treasury data released on Tuesday. Foreigners sold $27.2 billion in long-term U.S. securities in May, compared with sales of $21.8 billion in April. Private investors sold $29 billion in U.S. Treasury bonds, the largest monthly outflow since January. The sell-off coincided with rising anticipation that the Fed would scale back its own bond purchases as part of the ongoing stimulus program.
But on a net basis, there was a net inflow of $11.3 billion compared with an outflow of $38.3 billion in April. Buyers, including central banks, bought a net $40.3 billion. China, the largest foreign holder of U.S. debt, increased its Treasury holdings to $1.3159 trillion, while Japan decreased its holdings to $1.111 trillion. Note though, that Japan is again expected to buy given their stimulus program and desire to keep the yen weak. So don’t read too much into this month’s number.
Foreigners sold stocks in May after buying in the prior month. They also sold U.S. agency debt reversing the net purchases in April. But corporate bond purchases rose, reversing the outflows of the prior month.
TICs data was one of the big influences in forex markets several years ago but lost impact in the crisis. However, with the onging U.S. reliance on foreign inflows to fund the trade deficit, expect it to again return as a key investor focus.