Friday, February 15, 2008

International Capital Flows

The Treasury Department released its monthly report on cross-border financial flows for December today. Here is a quick recap-

Net foreign purchases of long-term U.S. securities were $69.1 billion. Of this, net purchases by foreign official institutions were $35.8 billion, and net purchases by private foreign investors were $33.3 billion.

Of the $69.1 billion, 48% was invested in US equities. What does it mean? Do foreign investors believe US stocks are now cheap enough to further invest in? Maybe...

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $34.2 billion. Foreign holdings of Treasury bills increased $15.5 billion.

Monthly net treasury international capital flows were positive $60.4 billion. Of this, net foreign private flows were positive $8.4 billion, and net foreign official flows were positive $52.1 billion.

In a nutshell, foreigners are stockpiling on short and long-term US securities, and have been for years. Year-over-year, net foreign purchases of long-term US securities were more than $1 trillion, while foreign securities purchased by US residents were a negative $223.5 billion.

Read Full Report.

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