May Net Foreign Sales Of Long-Term US Securities $37.2 Billion

Net foreign sales of long-maturity U.S. securities totaled $37.2 billion in May, following sales of $8.5 billion the month before, according to a U.S. Treasury Department report released Thursday.

The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including non-market transactions such as stock swaps and principal repayment on asset-backed securities.

The closely-watched figure, excluding transactions that don't occur on an open market, recorded net sales of $19.8 billion in long-term U.S. securities, after purchases of $11.5 billion in April, according to the monthly Treasury International Capital report, known as TIC.

The report's most comprehensive category, "monthly net TIC flows," includes non-market flows, short-term securities and changes in banks' dollar holdings. This measure of net foreign capital outflow was $66.6 billion in May, versus an outflow of $38.0 billion the previous month.

Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit. The May TIC flow compares with the $25.96 billion trade deficit during the month.

Within the long-term securities category, foreign net sales of U.S. Treasury notes and bonds totaled $22.55 billion in May, compared with net purchases of $41.89 billion the month before.

Private foreign investors sold a net $343 million in Treasury notes and bonds in May, after buying $24.79 billion in April. Meanwhile, foreign official institutions such as central banks sold a net $21.76 billion of these Treasurys, compared with net purchases of $17.13 billion the month before.

Net foreign purchases of debt issued by U.S. government-sponsored agencies like Fannie Mae and Freddie Mac totaled $12.81 billion in May, compared with sales of $2.48 billion in April.

For U.S. equities, net foreign purchases totaled $16.73 billion in May, compared with purchases of $4.58 billion the previous month.

For corporate bonds, net foreign purchases were $935 million, versus sales totaling $9.73 billion the previous month.

China remained the largest holder of U.S. Treasury securities, having surpassed Japan late last year. China increased its holdings to $801.5 billion in May. Japan, the second-largest holder of U.S. Treasurys, decreased its holdings to $677.2 billion.

The TICs data, typically released around the 11th business day of the month, can be found on the Treasury's Web site at: http://www.treas.gov/tic. With each monthly release, Treasury revises the previous month's data as well.

The next report, covering June, is scheduled for release on Aug 17.

-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-9275; [e-mail]