Capital Inflows in November: Only the Safest Assets Please

Not only did foreign investors continue to eschew riskier U.S. assets such as corporate bonds and agency securities, but U.S. investors continued to dump foreign securities in November. Strong foreign purchases of very safe Treasury bills kept total capital inflows positive in November.

Net Long-Term Securities Purchases Declined Again

* Net purchases of long-term securities declined for the second consecutive month. The $56.0 billion decline in foreign purchases of U.S. securities was offset by the $34.3 billion drop in U.S. purchases of foreign securities.

* Foreign investors continued to eschew agency securities and corporate bonds in November.

Total Capital Inflows Remained Positive

* However, purchases of short-term securities, especially Treasury bills remained strong. In the current environment, investors are flocking to the safest assets.

* In total, $56.8 billion entered the country in November, down from October's surge. The relative decline in capital inflows helps to explain the stability of the dollar during the month.