Global demand for U.S. financial assets rises

Posted 1/18/12

WASHINGTON - Global demand for U.S. financial assets rose more than forecast in November, boosted by investors seeking shelter from the European debt crisis.

Net buying of long-term equities, notes and bonds totaled $59.8 billion during the month compared with net purchases of $8.3 billion in October, the Treasury Department said Wednesday in Washington. Including short-term securities foreigners bought a net $48.6 billion compared with net selling of $39.6 billion the previous month.

“Demand for U.S. treasuries continued strong amid stress in Europe,” Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the data were published. “It’s a desire for European banks and other investors to reduce the risk of their portfolios.”

The U.S. Treasury data released Wednesday captures international purchases of government notes and bonds, stocks, corporate debt and other securities.

Economists had forecast net buying of $40 billion of long-term assets, the median of five estimates in a Bloomberg News survey before Wednesday’s report. Their estimates ranged from a net buying of $20 billion in long-term assets to $75 billion.

China Biggest

China remained the biggest foreign holder of U.S. Treasuries in November after its holdings fell by $1.5 billion to $1.13 trillion. Hong Kong, counted separately from China, lowered holdings by $5.4 billion to $105.3 billion.

Japan, the second-largest holder, increased its holdings in November by $59.9 billion to $1.04 trillion.

Total foreign purchases of Treasury notes and bonds were $54 billion in November compared with buying of $15.3 billion in October.

Even as European leaders boosted their rescue fund to 1 trillion euros ($1.3 trillion) and persuaded bondholders to take a 50 percent nominal loss on holdings of Greek debt in late October, investors remained skeptical about ongoing negotiations that may be subject to bouts of political infighting and investor revolt.

Loss Protection

Investors are protecting against losses amid signs European leaders have yet to contain the crisis. Standard & Poor’s stripped France of its AAA rating and lowered the credit rating of eight other European Nations last week. S&P cut the rating of the European Financial Stability Facility, the region’s temporary bailout fund, to AA+ from AAA on Jan. 16.

The U.S. deficit in fiscal 2011 was $1.3 trillion and the White House budget office in September forecast it will be $956 billion in the current fiscal year.

Treasuries outpaced company securities last year, returning 9.8 percent including reinvested interest, compared with 6.8 percent for the Bank of America Merrill Lynch U.S. Corporate & High Yield Master Index.

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