Foreigners sold Treasuries for a second consecutive month in April, as holdings of central banks and government institutions declined, data from the Treasury Department showed on Friday.
Analysts said foreign central banks, especially those in emerging markets, sold Treasuries to prop up their weakening currencies.
Overseas investors sold 4.78 billion dollars in US Treasuries in April, following outflows of 4.92 billion dollars the previous month.
In addition, major holders of US Treasuries showed a decline in holdings to 6.17 trillion dollars in April, the lowest since December.
Those countries whose holdings declined included China, whose Treasuries portfolio fell to 1.18 trillion dollars in April after posting increases in March and February. China though is still the largest non-US holder of Treasuries.
Data also showed that Russia’s holdings showed a massive drop to 48.7 billion dollars from 96.1 billion dollars in March. Treasury holdings of Turkey, Mexico and India all declined during the month.
“This reflects emerging market wobbles,” said Gennadiy Goldberg, interest rates strategist, at TD Securities in New York. “The central banks sold their Treasuries to defend their currencies.”
The dollar has strengthened so far this year against a host of emerging market currencies such as the Turkish lira, Mexican peso, and Indian rupee amid political tensions in some of these countries, and as the Federal Reserve continued to raise interest rates.
Japan’s holdings of Treasuries, meanwhile, declined as well in April to 1.031 trillion dollars, their lowest level since October 2011, data showed.
TD Securities’ Goldberg said the decline in Japan’s holdings was not a surprise as Japanese investors have long been diversifying away from US Treasuries.
Japanese investors typically buy Treasuries on a cross-currency hedged basis and the advantage has gone against US debt because of the rise in Libor cost.
US stocks, meanwhile, saw inflows of 5.93 billion dollars in April, from outflows of 24.15 billion dollars in March.
Data further showed offshore investors purchased 93.9 billion dollars in long-term US assets in April, after buying 61.8 billion dollars the previous month. Including shorter-dated securities, foreigners bought 138.7 billion dollars in April, from sales of 43.6 billion dollars in March.