NEW YORK (Reuters) – Foreign buying of U.S. Treasuries grew the most in six months in January, data from the U.S. Treasury showed on Monday, thanks to a rise in yields that have been boosted by strong economic prospects which could also lift inflation.
Foreign investors led by China and Japan held $7.119 trillion in Treasuries in January, up nearly $49 billion from $7.07 trillion the previous month, representing the strongest buying of Treasuries by foreigners since July 2020.
The holdings of Japan, the largest non-U.S. holder of Treasuries, rose to $1.276 trillion in January, from $1.251 trillion in December 2020. China raised its holdings to $1.095 trillion in January from $1.072 trillion the previous month.
“What stands out are the big purchases from China and Japan, as the back-up in rates made Treasuries attractive,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.
At the end of January, U.S. benchmark 10-year Treasury yields were at 1.094%, up from 0.917% at the beginning of the month.
On a transaction basis, however, U.S. Treasuries showed an outflow of $48.97 billion in January, an increase from outflows of $20.69 billion in December 2020. U.S. Treasuries have posted inflows in eight of the last 11 months.
Analysts said this particular metric does not totally capture demand for Treasuries as it pertains to specific transactions for the month and not actual holdings.
Foreign investors bought $11.978 billion in U.S. equities in January, down from $78.301 billion the previous month. Foreigners have added U.S. stocks for nine straight months.
Data also showed U.S. corporate bonds had a net inflow of investment of $18.82 billion in January, from outflows of $11.395 billion in October.
Overall, net foreign acquisitions of U.S. long-term and short-term securities, as well as banking flows, amounted to a net inflow of $106.3 billion in January, up from a net inflow of $8 billion in December.
U.S. residents, meanwhile, reduced their holdings of long-term foreign securities, with net sales of $56.8 billion in January.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Sonya Hepinstall)