Foreigners bought a record $140.5 billion of long-term U.S. securities in March, the Treasury Department said on Monday, and more than doubled purchases of U.S. government bonds.
China remained the largest holder of Treasury debt and added to its holdings for the first time in seven months. Net Treasury purchases by all foreign investors jumped by $108.47 billion in March from $48.1 billion in February.
Long-term purchases exceeded our best expectations and clearly show foreign investors have not satiated their appetite for U.S. securities, said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
March's net long-term inflow was roughly three times the $47.1 billion inflow in February and shattered a previous record set in May 2007. The Treasury began compiling the data in the 1930s.
Investors said some of the Treasuries buying may have been driven by worries about Greece's debt crisis and fear of exposure to the euro.
Demand for U.S. assets was particularly broad in March, with foreigners snapping up $16 billion in corporate debt, snapping a nine-month streak of net selling. U.S. agency debt purchases spiked to $21.9 billion from $2.4 billion.
CHINA ADDS TO TREASURY HOLDINGS
China bought $17.7 billion worth of U.S. government debt in March, swelling its total holdings to $895.2 billion. It was the first time China added to its Treasury stash since September.
Japan remained in second place with $784.9 billion, up from $768.5 billion in February.
This is a vote of confidence, of course, and we're impressed with the breadth of buying and the 'quality' of those buyers -- UK, Japan, China, OPEC, Canada, Germany, said David Ader, head of government bond strategy at CRT Capital Group, Stamford, Connecticut.
China's net Treasury purchases may be the first tentative signs that maybe they really are hostage to the U.S. dollar and are really struggling to find an alternative to the dollar, said Alan Ruskin, chief international strategist at RBS Securities in Stamford, Connecticut.
Some analysts said the worsening of a European debt crisis that resulted in a $1 trillion bailout for troubled euro zone governments may show foreigners increased U.S. asset purchases in April and May.
The euro has lost more than 13 percent against the dollar so far this year, hitting a four-year low beneath $1.23 on Monday.
The data essentially means the dollar is very well supported on a trade and investment flow basis, which drives the long-term value of the currency, Woolfolk said.
Overall inflows, which include short-term securities such as Treasury bills, also rose in March, with foreigners buying a net $10.5 billion, compared with an upwardly revised $9.7 billion inflow the prior month.
U.S. banks' own dollar-denominated liabilities to foreign residents also decreased sharply, by $123.8 billion. Analysts said that could be partly tied to dollar-demand from investors in Europe.
(Reporting by Steven C. Johnson; Editing by Chizu Nomiyama and Dan Grebler)