Foreign Demand for Equities and Short-Term Assets More than Offsets Selling of U.S. Treasuries in April

Net total foreign purchases of U.S. securities were much stronger than anticipated in April, increasing by $111.8B, twice as much as the $55B consensus, and almost four times the net $30.1B pace of acquisitions during March. Long-term TIC flows also improved, but at a slower pace. April long-term demand was $84.1 billion versus $51.2B in in March. Both of the Mach net and long-term TIC flows were revised down by around $15B from the originally reported figure.

Private demand for U.S. securities (+$93.6B) swamped official/central bank (+$18.2B) flows in April. The 5-to-1 ratio was much higher than the 3-to-1 average ratio for the past year. Most of this increase was in short-term securities, as net long-term private demand fell $5B from March to April. Within the private sector demand for long-term securities, equities and agencies saw the largest increase from the prior month. Corporate bonds experienced slower demand, and there was outright selling of Treasuries. The approximately $20B increase in equity purchases coincides with a gain of +5.7% in the DOW during April.

Holdings of agency debt continue to expand, increasing by $36B in April and $15B in March. On the other hand, demand for U.S. Treasuries fell to the lowest level in almost four years during April as purchases fell barely into positive territory for the month. Japan increased its purchases of Treasuries, but China was a net seller of $6B. It is likely that the Middle East was also a seller of over $10B, as were the hedge funds.

U.S. investor demand for foreign securities declined in April to $13.3 billion from $47.4B during March.