International Buying of Long-Term U.S. Assets Climbs More Than Estimated

Global demand for U.S. stocks, bonds and other financial assets rose in November as private investors stepped up purchases.

Net buying of long-term equities, notes and bonds totaled $85.1 billion during the month, the highest since August, compared with net buying of $28.9 billion in October, according to data released today in Washington.

Europe’s sovereign debt crisis has driven investors to the relative safety of U.S. Treasury securities. Investors are also attracted by rising corporate profits and share prices as the world’s largest economy maintains its recovery from the deepest recession since the 1930s. The Standard & Poor’s 500 Index has climbed more than 21 percent in the past six months.

“Demand for U.S. financial assets remains fairly strong,” said Jim O’Sullivan, global chief economist at MF Global Inc. in New York. “The U.S. bond market remains attractive relative to many countries in Europe in particular.”

Purchases by private investors offset record net selling of $40.8 billion by official foreign investors including China. Such sales exceeded the previous record of $38.7 billion set in May 2010, the Treasury said. This includes $32.1 billion in sales of Treasury bills alongside purchases of $11.1 billion in notes and bonds.

China, the biggest foreign holder of U.S. Treasuries, saw its portfolio fall by $11.2 billion to $895.6 billion in November. Hu Jintao, the Chinese president, meets officials in Washington this week.

Alternative Channels

“China seemed to reduce their Treasury bond holdings by about $11 billion, but as we have noted flows could go through a different financial center, like London,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

Japan, the second-largest holder, increased its holdings by $2.2 billion to $877.2 billion in November. The United Kingdom increased its holdings by $33.3 billion to $511.8 billion in November, and Hong Kong, counted separately from China, reduced its holdings by $300 million to $138.9 billion.

Including short-term securities such as bills and stock swaps, foreigners purchased a net $39 billion in November, compared with net buying of $15.1 billion the previous month. Foreign central banks and other official buyers sold Treasury bills and bought longer-term U.S. government debt.

Private Investors

Private investors posted net purchases of $79.8 billion, including $9.8 billion in bills and $50.6 billion of Treasury notes and bonds.

“It looks like it’s not a doom-and-gloom story, at least for the moment,” said Thomas Simons, money market economist for Jefferies Group Inc. “They still have some appetite for Treasuries.”

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

Before today’s report, economists in a Bloomberg News survey projected long-term U.S. financial assets would show net purchases of $40 billion.

Total foreign purchases of Treasury notes and bonds were $61.7 billion in November, compared with purchases of $24.7 billion in October. Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac registered net buying of $14.2 billion in November, about the same as in October.

Net foreign purchases of equities were $13.3 billion in November after net purchases of $16.0 billion in October. Investors purchased a net $4.7 billion in U.S. corporate debt in November after buying $1.1 billion in October.