Demand for U.S. Long-Term Financial Assets Rose in June

Global demand for long-term U.S. financial assets rose in June from a month earlier as investors abroad bought Treasuries and agency debt and sold stocks.

Net buying of long-term equities, notes and bonds totaled $44.4 billion for the month, compared with net purchases of $35.3 billion in May, the Treasury Department reported today in Washington. Including short-term securities such as stock swaps, foreigners sold a net $6.7 billion, compared with net buying of $17.1 billion the previous month.

The European debt crisis led investors to buy American government securities as a safe haven, while shying away from equities and corporate bonds. Today’s report showed net sales of U.S. stocks in June and the most net sales of corporate bonds since January, alongside an increase in net purchases of Treasuries.

“Financial-market conditions were still shaky in June, and the U.S. was still the best safe-haven bet out there,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ, in an e-mail ahead of the report. “The U.S. may be unable to get its budget deficit back under $1 trillion in the near future, but so far, this is not scaring off private foreign investors.”

Stock-index futures and the dollar held earlier losses after the report and Treasury securities maintained gains. The contract on the Standard & Poor’s 500 Index fell 0.2 percent to 1,074 at 9:10 a.m. in New York. The yield on the benchmark 10- year Treasury note dropped to 2.61 percent from 2.67 percent late on Aug. 13.

Survey Median

Economists in a Bloomberg News survey projected $45.7 billion in net foreign purchases of long-term U.S. financial assets in June, according to the median of six economists’ projections. The estimates ranged from net buying of $30 billion to $70 billion.

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.

China, the biggest foreign investor in Treasuries, lowered its holdings by $24 billion in June to $843.7 billion.

In a report to Congress released July 8, the Treasury Department said China’s currency, the yuan, “remains undervalued” after the nation last month ended its peg to the dollar. It also said China took a “significant step” when it began to allow markets to drive the currency higher.

Japan’s Holdings

Japan, the second-largest owner, raised its holdings by $16.9 billion in June to $803.6 billion.

The Standard & Poor’s 500 Index in June declined 5.4 percent after falling 8.2 percent in May, in the first back-to- back declines since January and February 2009. The Dollar Index, a gauge of the U.S. currency’s strength against six other major currencies, fell 0.6 percent during the month.

U.S. Treasuries returned 1.9 percent in June, according to an index compiled by Bank of America Corp.’s Merrill Lynch unit.