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UPDATE 1-Foreign holdings of U.S. Treasuries increase for 2nd month in December -data

Kitco Media
By Reuters
Published:
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Reuters
(Adds new comment, byline, details) By Gertrude Chavez-Dreyfuss NEW YORK, Feb 15 (Reuters) - U.S. Treasuries held by foreigners increased for a second consecutive month in December, data from the U.S. Treasury Department showed on Wednesday, as yields started to decline from their peaks, becoming more attractive to offshore investors. Foreign holdings rose $7.314 trillion in December, up from $7.268 trillion in the previous month. Treasury holdings in December, however, were 5.5% lower from the December 2021 level of $7.740 trillion. "It's another month of buying of Treasuries by foreign investors and that's interesting given the amount of big
selling we've had in the prior few months," said Gennadiy Goldberg, senior rates strategist, at TD Securities in New York. "It's encouraging that foreign investors were starting to dip their toes in U.S. Treasury debt at the end of the year. It made sense because rates have actually started to stabilize and move off the highs."


The benchmark 10-year Treasury yield started the month December at 3.527% and ended the month at 3.835%. U.S. 10-year yields hit a 15-month high of 4.338% in October last year.


Still, buying in both December and November paled in comparison to selling in October and September. Goldberg pointed out that buying of Treasuries the last two months of 2022 reached just $182 billion, compared with net selling of roughly $360 billion in September and October. It was also in December when the Federal Reserve started to moderate the pace of its rate hikes, tightening policy rates by 50 basis points at the meeting that month, after multiple 75-bps increases.


Japan remained the largest non-U.S. holder of Treasuries, with $1.076 trillion in December, down slightly from $1.082 trillion in the prior month. Japan had also sold Treasuries in the previous months to defend the struggling yen.


Data also showed holdings of China, the second biggest non-U.S. holder of Treasuries, fell to $867.1 billion in December, from $870.2 billion in November. China's holdings were the lowest since May 2010 when it had $843.7 billion.


China has also been selling Treasuries to help boost its sluggish currency against a strong dollar.


On a transaction basis, Treasuries notched foreign inflows of $19.98 billion in December, compared with $54.21 billion in November. December inflows into the sector were the smallest since July 2022.


That said, Treasuries have seen net foreign inflows for eight straight months.


Data also showed foreign inflows of $54.98 billion in U.S. stocks in November, the largest since December 2020.


Foreigners also bought U.S. corporate bonds to the tune of $14.38 billion, compared with $21.51 billion in November. The sector has seen foreign inflows for 12 straight months.
(Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis and Diane Craft)

Messaging: rm://gertrude.chavez.reuters.com@reuters.net))
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