US Treasuries post foreign inflows for second consecutive month in December

NEW YORK, Feb 15 (Reuters) – Net inflows of foreign capital into Treasury bills rose for a second straight month in December to $44.02 billion, U.S. Treasury Department data showed on Tuesday.

Foreign private investors bought $53.323 billion in Treasury bills, while foreign official institutions sold $9.68 billion in December.

Foreigners bought Treasuries in six of the last 12 months in 2021, hitting an all-time high of around $118 billion in purchases in the month of March.

The foreign purchases took place despite the rise in Treasury yields in December.

Benchmark 10-year US Treasury yields started December with a yield of 1.4037%, rising nearly 11 basis points to 1.5118% by the end of that month.

The Federal Reserve, at its policy meeting in December, said its inflation target had been met and that it would end its pandemic-era bond purchases in March. That would pave the way for three quarter-percentage-point interest rate hikes by the end of 2022 and three more in 2023.

The Fed statement pushed US Treasury yields higher.

Overall, foreign holdings of Treasuries hit a new high in December of $7.739 trillion, from $7.733 trillion the previous month.

The increases came from holdings in custodial countries such as the UK, Ireland and Belgium, which hold securities for other investors.

The data also showed Japan’s holdings fell to $1.304 billion in December, although it remained the largest non-US holder of Treasuries.

China, the second-largest holder of Treasuries, also saw its holdings fall during the month to $1.068 trillion.

In other asset classes, US corporate bonds recorded outflows for the first time in five months, totaling $4.015 billion in December, compared with inflows of $9.825 billion in November.

Foreign inflows into U.S. stocks, by contrast, hit $30.45 billion in December, the largest since March 2021, from $7.217 billion the previous month.

The Treasury report also showed that US residents reduced their holdings of long-term foreign securities, with net sales of $37.6 billion in December.

Overall, net foreign acquisitions of long-term and short-term U.S. securities, including bank flows, showed a net outflow of $52.4 billion, compared with a revised inflow of $216.8 billion in November.

(Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis and Sam Holmes)

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