International Demand for Long-Term U.S. Assets is NOT Much Weaker

Bloomberg News published today, on its terminals and on the web, an alarming article entitled "International Demand for Long-Term U.S. Assets Weakened in July" decrying that "foreigners sold a net $97.5 billion [of US securities] in July, compared with net selling of $56.8 billion the previous month." It also lamented that "foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac weakened, with net sales of $4.6 billion in July after buying of $5.1 billion in June, according to the Treasury." Supposedly, that is due to "record amounts of debt sales to fund a $787 billion stimulus spending package" and to "the U.S. budget deficits [being] off the charts."

Well, the stimulus and the deficits don't help, but let's first look at facts.

Using data from the same company, let's first look at total net foreign purchases of US assets: that time series can be found on the Bloomberg terminal by typing FRNTTNET . The plot for the last few years is as follows:


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We can see that the July number is far from being as bad as that of Jan 09, or that of August 2007!

Let's now look at net foreign purchases of US Agency debt, using the FRNTUSGV index on the Bloomberg terminal. We see that the July number is in fact more than 10 times better than the October 08 number, when net foreign sales were $50.2bn, and much better than the July 08 or December 08 numbers!


(click to enlarge)

So, the numbers are not good, but nothing new, and nothing worse...