Foreign inflows into US Treasuries in May rose to their highest level in more than a year, data from the US Treasury Department showed on Thursday, as concerns about Greece and the Chinese stock market spurred a flight to safe assets. Offshore purchases of US Treasuries totalled $53.4 billion in May, the largest since February 2014. Foreign investors bought US government debt for a third straight month.
Benchmark US Treasuries ended May with a yield of 2.0950 percent, slightly higher than 2.0490 percent at the beginning of the month. Greece's debt troubles started percolating again in May, culminating in a historic "No" vote in early July for another bailout deal that would entail more austerity for Greeks. It was also toward the latter part of May that the Chinese stock market started losing value. Both events underpinned safe-haven assets such as US Treasuries and German bonds, and weighed on riskier assets such as equities.
Overall, data showed foreign investors bought long-term US securities for a fourth consecutive month in May. Net buying of long-term US assets totalled $93 billion in May from a revised inflow of $54.4 billion in April. Including short-dated assets such as bills, overseas investors bought $115 billion in May compared with $107.9 billion the previous month. Meanwhile, China's holdings of US Treasuries increased for a third straight month in May. China is still the largest holder of US government debt.
China held $1.270 trillion in US Treasuries in May, compared with $1.263 trillion in April. Its holdings peaked at $1.317 trillion in November 2013. Japan had the second-largest holdings of US Treasuries, with $1.214 trillion, down slightly from $1.215 trillion in April. Belgium, the third-largest holder of US debt as recently as February, further pared its holdings in May to $202.8 billion from $228.9 billion in April. Belgium's holdings in May were the lowest since November 2013, when they were $200.6 billion.
The euro zone country's holdings of US Treasuries peaked at a record $381.4 billion in March 2014, but have since dropped more than 40 percent, the data showed. Analysts have said Belgium's holdings had risen due to foreign accumulation of Treasuries held in custody accounts at Belgium-based clearing houses. US equities, meanwhile, posted an outflow of $14 billion in May, from an inflow of $675 million in April. Private investors sold $14.470 billion in US stocks.