UPDATE: Jan Net Foreign Sales Of Long-Term US Secs $60.9 Billion

Net foreign sales of long-maturity U.S. securities totaled $60.9 billion in January, following purchases of $24.3 billion the month before, according to a U.S. Treasury Department report released Monday.

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 selling of $43.0 billion in long-term U.S. securities, after purchases of $34.7 billion in December, 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 a record $148.9 billion in January, versus an inflow of $86.2 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 January TIC flow compares with the $36.03 billion trade deficit during the month, which was the smallest gap since 2002.

Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, said the big outflows are a concern and could represent a trend away from the flight to quality that has boosted purchases in U.S. assets in recent months.

"This was a truly awful report, throwing into question the funding of the U.S. current account deficit," he said in a statement. "The irony is that the deterioration in the TICS data was largely due to an alleviation in risk averse, safe-haven purchases of (dollar)-denominated deposits and the return of U.S. investors to the foreign bond market."

Within the long-term securities category, foreign net purchases of U.S. Treasury notes and bonds totaled $10.7 billion in January, compared with net purchases of $15.0 billion the month before.

Private foreign investors bought a net $12.7 billion in Treasury notes and bonds in January, after buying $11.8 billion in December. Meanwhile, foreign official institutions such as central banks sold a net $1.9 billion of these Treasurys, compared with net purchases of $3.9 billion the month before.

Net foreign sales of debt issued by U.S. government-sponsored agencies like Fannie Mae (FNM) and Freddie Mac (FRE) totaled $22.5 billion in January, compared with $37.4 billion in sales in December.

For U.S. equities, net foreign purchases totaled $1.4 billion in January, compared with purchases of $3.9 billion the previous month.

For corporate bonds, net foreign sales were $8.4 billion, versus purchases totaling $41.0 billion the previous month.

China, according to the December data, remained the largest holder of U.S. Treasury securities, having surpassed Japan late last year. China's holdings totaled $739.6 billion, followed by Japan's $634.8 billion and $186.3 billion among oil exporters

Tony Crescenzi, chief bond-market strategist at Miller Tabak & Co., said net selling by Caribbean banking centers and Luxembourg could be related to the scandal involving financier Bernard L. Madoff.

Sales in those two areas "reek of hedge-fund selling and quite possibly from investors who were Madoff-ed," said Crescenzi.

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 February, is scheduled for release April 15.

-By Tom Barkley, Dow Jones Newswires; 202-862-9275; [e-mail]

(Emily Barrett in New York contributed to this report)