Foreign investment into the US slowed in Jan, but, should increase as investors seek safety post-Japan crisis

Foreign investment in US long-term financial securities slowed in Jan to net $51.5 BB, this number is still strong but will be meaningless once the effects from the Japan crisis blow an even bigger bubble as investors flee the worlds second largest economy.  Dec posted $62.5 BB and Nov showed $85.2 BB net. Foreigners bought $74.3 BB from the US, while US investors only $22.8 BB in foreign securities.  Foreign demand for US equities was especially strong in January with demand for US Treasuries holding strong.

Chinese - who hold the largest asset position- dropped to $1.15 TT.  They have been net sellers.  While the UK and Japan have been the most aggressive buyers.  Japan's position rose to $885.9 billion.

What is the most concerning is the May release which will show a huge flight to security.  Yields should drop.  Later in 2011, the safety crowd will die and then Japan will start to sell their Treasuries to pay for the massive costs of reconstruction.  Via Treasury:
The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for January 2011. The next release, which will report on data for February 2011, is scheduled for April 15, 2011.

Net foreign purchases of long-term securities were $51.5 billion.
  • Net foreign purchases of long-term U.S. securities were $74.3 billion. Of this, net purchases by private foreign investors were $46.2 billion, and net purchases by foreign official institutions were $28.1 billion.
  • U.S. residents purchased a net $22.8 billion of long-term foreign securities.
Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $32.1 billion.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $21.4 billion. Foreign holdings of Treasury bills decreased $31.3 billion.

Banks’ own net dollar-denominated liabilities to foreign residents increased $21.9 billion.
Monthly net TIC flows were $32.5 billion. Of this, net foreign private flows were $47.2 billion, and net foreign official flows were negative $14.7 billion.


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