Interesting, demand for US assets still climbing. With corporate balance sheets top, perhaps not such a surprise
By Vincent Del Giudice and Cheyenne Hopkins – Dec 15, 2011 3:14 PM GMT+0100
Global demand for U.S. financial assets rose in October from a month earlier even as China decreased its holdings, the Treasury Department reported today.
Net buying of long-term equities, notes and bonds totaled $4.8 billion during the month compared with net purchases of $68.3 billion in September, according to data released in Washington. Including short-term securities such as stock swaps, foreigners sold a net $48.8 billion compared with net buying of $65 billion the previous month. Before the report, economists predicted net buying of $62.5 billion of long-term assets, according to the median estimate.
A worldwide Bloomberg poll released last week shows investors sought safety in the U.S. from Europe’s sovereign debt crisis even after Standard & Poor’s lowered its credit rating on Treasury debt in August. U.S. government debt rallied the most since the end of 2008 during the third quarter after the unprecedented rating cut.
“We may have gridlock in Washington but at least the world’s investors know security when they see it,” said economist Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, before the report. “Where else are you going to put your money?”
Estimates of four economists surveyed before the report ranged from net $32 billion of buying of long-term assets to $75 billion of net buying.
Congressional inaction on cutting the budget deficit led to the loss of the country’s last stable outlook from the three biggest credit-ranking companies. Fitch Ratings lowered its rating to negative on Nov. 29. Fitch said its outlook on the U.S., which it still assigns its top AAA grade, reflects “declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path will be forthcoming.”
In November, a congressional panel of Republicans and Democrats, the so-called supercommittee, failed to agree to $1.2 trillion in government budget cuts before the end of the year.
China remained the biggest foreign holder of U.S. Treasuries in October after its holdings fell by $14.2 billion to $1.13 trillion. Hong Kong, counted separately from China, increased its holdings by $1.7 billion to $110.7 billion.
Japan, the second-largest holder, increased its holdings in October by $22.2 billion to $979 billion. The U.K., a major banking center for Asian investors, reduced its holdings by $13.2 billion to $408.4 billion.
Confidence in the U.S. remains intact even with the swings in financial markets and sentiment.
The U.S. received its highest rating among global investors in more than two years, according to a Bloomberg Global Poll of 1,097 investors conducted Dec. 5-6.
In the fiscal year ended Sept. 30, the government reported the second-highest annual deficit on record, $1.3 trillion.