Foreign selling of U.S. long-term portfolio assets rose for a second straight month in June as investors abroad sold equities and a record amount of Treasury notes and bonds, a government report showed.
The net long-term portfolio investment outflow was $66.9 billion after a $27 billion net decline in May, the Treasury Department said in a statement today in Washington. Net selling of long-term Treasuries by private foreign investors increased to $40.1 billion from $29 billion the prior month, the department said.
Private foreign investors were net sellers of all categories of U.S. long-term portfolio assets -- government debt, agency securities, corporate bonds and stocks in June, the report showed. As U.S. growth strengthens and the world economy improves, investors may be more willing to take on risks elsewhere before the Federal Reserve starts reining in monetary stimulus, economists said.
“Changing expectations for the future path of Fed policy led to some significant deleveraging,” said Thomas Simons, a government-debt economist in New York at Jefferies LLC, one of the 21 primary dealers that trade with the Fed.
Total net selling of Treasuries in June, combining official and private transactions, was an all-time high of $40.8 billion, according to data compiled by Bloomberg going back to 1977.
Total Flows
Including short-term securities such as Treasury bills and stock swaps, the total cross-border outflow was $19 billion in June, compared with a $56.6 billion inflow the prior month, the report showed.
Private investors abroad sold a net $25.5 billion of U.S. equities in June, $9.1 billion of government agency bonds and $6.9 billion of corporate bonds, today’s report showed. The net selling of equities was the biggest since August 2007.
The Treasury’s monthly report on the cross-border flow of portfolio assets captures foreign buying and selling of U.S. securities as well as American investors’ transactions abroad. It also tracks holdings of Treasuries by countries.
China stayed the biggest foreign owner of U.S. Treasuries in June as holdings fell $21.5 billion to $1.276 trillion, according to the Treasury. It was the biggest drop in China’s Treasuries holdings selling since December 2011, data compiled by Bloomberg showed.