Foreign investors sold US Treasury bonds and notes for a third straight month in January, data from the US Treasury department showed on Friday, a trend that has been in place for several years. They sold $11.99 billion in Treasuries in January, compared with a record $77.35 billion the previous month, data showed. Selling was mainly from foreign official accounts.
"It could be that foreign investors rotated away from Treasuries in January and bought agencies, for instance, to get a higher yield," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York. Foreign inflows into US agency debt totaled $22.99 billion, data showed. The sector has seen foreign inflows for nearly two years.
Yields on benchmark US Treasuries in January were down 5 basis points, after a 32-basis point drop in December. The overseas official sector, which includes foreign central banks, bought nearly $2 trillion between 1995 and 2014, Treasury data showed. But over the last four years, it sold close to $1 trillion.
Last year's jump in the dollar has reduced demand for Treasuries, as central banks sold their holdings of US debt to defend their currencies. But in January, Chinese holdings of US Treasuries increased to $1.126 trillion, from $1.123 trillion in December. The world's second-largest economy remains the largest holder of US Treasuries outside the United States.
Japan, the second-largest non-US holder of Treasuries, also increased its holdings of Treasuries in January, to $1.069 trillion, the largest since November 2017. Overall, major foreign holder of Treasuries boosted their holdings to $6.307 trillion in January from $6.265 trillion the previous month.
"There was a lot of safety buying in January because of concerns on global growth and the US-China trade deal," Goldberg said. Foreigners also continued to sell US stocks in January, to the tune of $31.20 billion, after outflows of $18.21 billion in December. Foreign investors have sold stocks for nine straight months. The report also showed foreigners sold $7.2 billion in net long-term securities in January after selling $48.3 billion in December.