International Buying of US Assets Plunges on Europe Optimism

Friday, 16 Nov 2012 09:41 AM

 

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International purchases of U.S. financial assets plunged in September as confidence grew that Europe was beginning to solve its debt crisis.

Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said Friday in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.

“The slowdown in the pace of the capital inflows was due in part to the improvement in global sentiment toward the European financial crisis following the European Central Bank’s quantitative easing announcement,” Millan Mulraine, senior U.S. strategist for TD Securities Inc. in New York, said before the report was released.

European Central Bank policy makers on Sept. 6 agreed to an unlimited sovereign bond buying program to wrest control of interest rates in the euro area and to stem the crisis in the region. ECB President Mario Draghi has called the euro “irreversible” and said the new government bond purchasing program will have effective conditionality attached.

“The moderation in global capital flows in the U.S. was driven in part by profit-taking in September,” Mulraine said. “We did have a surge in August, in anticipation of the QE3 announcement, and so in September you had some profit-taking.”

The Federal Open Market Committee said Sept. 13 that it will undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”

Including short-term securities such as stock swaps, foreigners bought a net $4.7 billion in September, down from net purchases of $63.5 billion the previous month.

China remained the biggest foreign owner of U.S. Treasuries in September after its holdings rose $300 million to $1.16 trillion, according to the Treasury.

© Copyright 2014 Bloomberg News. All rights reserved.

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