International promoting in Treasuries in February hits highest since December 2018: knowledge By Reuters
© Reuters. FILE PHOTO: FILE PHOTO: The US Treasury Department is located in Washington
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – According to the U.S. Treasury Department, released Thursday, foreign government bond outflows peaked in more than two years in February as investors sold government bonds in anticipation of returns as the economy emerged would rise pandemic.
On a transaction basis, foreign investors sold $ 65.46 billion in government bonds a month. This was the largest outflow since December 2018, compared to outflows of $ 49.13 billion the previous month. Investors have sold government bonds in nine of the past 12 months.
Foreign holdings of government bonds fell to $ 7.098 trillion in February, from $ 7.119 trillion in the previous month. In January, foreign ownership of government bonds increased the most in six months.
“Many investors may have been nervous about the rate hike and decided to sell expectations that rates would rise,” said Gennadiy Goldberg, senior rate strategist at TD Securities in New York.
At the end of February, ten-year US benchmark government bond yields were 1.456%, down from 1.077% at the beginning of the month.
An improving US economy, partly due to increased vaccinations, fueled higher yields in February and market expectations that the Federal Reserve could potentially hike interest rates earlier than officials suggested, which it did not until at least 2024.
The Fed held on to its guns and said no rate hike was imminent in the next few years.
Japan led the fall in foreign holdings in February at $ 1.258 trillion, up from $ 1.276 trillion in January, possibly related to the country’s fiscal year-end in March, according to analysts.
Japanese investors tend to sell US assets and return these proceeds to their home country for accounting purposes with the upcoming fiscal year ending.
Japan remains the largest non-US holder of US Treasuries.
On the flip side, China added $ 1.1 trillion to its US national debt from $ 1.09 trillion in January.
“There are a lot of countercurrents. The sell-off has a lot of strong sellers, but it also attracted buyers who bought the dip,” said Goldberg of TD.
Data also showed that foreign investors bought US stocks worth $ 13.99 billion in February, up from $ 11.868 billion in January. Foreigners bought US stocks for 10 months.
U.S. corporate bonds had net inflows of $ 14.49 billion, compared with $ 18.87 billion in January.
Overall, net acquisitions of foreign long-term and short-term US securities and bank flows were $ 72.6 billion in February, compared with $ 105.8 billion in January.