January 16, 2020 / 10:23 PM / a month ago

UPDATE 1-Foreigners sold U.S. Treasuries for 4th straight month in November -data

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By Saqib Iqbal Ahmed

Jan 16 (Reuters) - Foreign holdings of U.S. Treasuries fell for a fourth straight month in November, data from the U.S. Treasury department showed on Thursday.

Foreign U.S. Treasury outflows totaled $41.528 billion in the month, compared with an outflow of $16.758 billion in October.

November’s outflows were the largest since December 2018.

“What is showing up in the data here can partially be described by the general sell-off in Treasuries that we saw in November just given the decline in value of the foreign holdings,” said Ben Jeffery, rates analyst, at BMO Capital Markets in New York.

“That’s not to say that there wasn’t some selling pressure as well, but really what it shows is some of the yield moves that we saw a couple months ago were a result of some large foreign accounts, both official and private, choosing to sell some of their Treasury holdings,” he said.

Treasuries sold off in November as investors fretted over the fate of a U.S.-China trade deal. Investors were also coming to terms with the U.S. Federal Reserve’s signal that it was done with its interest rate easing cycle.

In November, foreign official institutions, including central banks, shed $23.991 billion of U.S. Treasuries, the 15th straight month that they have been net sellers.

Sellers also included foreign private sector investors, who had been buyers of U.S. Treasuries for five straight months. In November, they shed $17.861 billion in U.S. Treasuries.

The report also showed China’s holdings of U.S. government bonds fell for the fifth straight month in November.

Increased U.S.-China trade tensions had raised the specter of Beijing using its Treasury holdings as a negotiating tool, but analysts see no evidence of this happening.

The drop in China’s holding was likely a reflection of price action in the bond market and mere ‘refining of their exposure,” Jeffery said.

Japan’s holdings of U.S. Treasuries slipped by $7.2 billion to $1.161 trillion in November, but the country remained the largest non-U.S. holder of U.S. government debt for a sixth straight month, the data showed.

Analysts peg Japan’s strong demand for U.S. Treasuries as a result of Japanese investors wanting to take advantage of the positive U.S. yield.

“The fact that such a large and sophisticated investor base is in a low yield environment domestically is driving a fair amount of buying interest,” BMO’s Jeffery said. (Reporting by Saqib Iqbal Ahmed; Editing by Jonathan Oatis and Richard Chang)

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