US Net Foreign Security Purchases
Net Foreign Security Purchases plummeted in July, as investors abroad
slashed investments in US Dollar-denominated assets. The most dramatic decline
occurred in Government Bonds. Net foreign purchases of Treasury bonds and notes
fell from 27.0B in June to 6.6B in July. Further exacerbating the drop,
international traders cut US Corporate Stocks holdings from $555.0B to $468.1 in
the same period. Though US equity desks likewise cut investments in foreign
stock markets, it was not enough to stem the net balance decline. The number
paints a very poor picture for net foreign security purchases going forward, and
the current figure falls far short of covering the simultaneous US trade
deficit. If international investor confidence has indeed fallen significantly,
we could see further drops in the US dollar moving forward.
Foreign exchange reactions to the figure were much stronger than for the
poor Current Account Balance figure this morning. The EURUSD immediately added
nearly 30 points in the 5 minutes following the news report.