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> May 2009 Treasury International Capital FlowsCapital Outflows – The New Normal? The good news is that there is further evidence that conditions in global financial markets are normalizing. The bad news is that this normalization has been adding up to net capital outflows from the U.S., as was the case again in May according to the Treasury’s data on international capital flows. May’s net capital outflow of $66.6 billion followed a net outflow of $38.0 billion in April. Foreigners, both private investors and official institutions, were net sellers of long-term U.S. Treasury securities in May, with net foreign holdings dropping by $22.550 billion. Somewhat surprisingly, the heaviest selling came from public institutions, who shed $21.763 billion of long-term Treasury securities, rather than from private foreign investors. Private investors stepped up purchases of U.S. agency debt, equities, and, to a lesser extent, corporate bonds in May. It is worth noting that, while reducing holdings of long-term U.S. Treasury securities in May, official foreign institutions added heavily ($55.6 billion) to their holdings of short-term U.S. Treasury bills, while private foreign investors were net sellers of T-bills in May. U.S. residents were net purchasers of long-term foreign securities in May, to he tune of $27.7 billion, marking the third consecutive month of net private U.S. purchases of foreign securities. © Mission Residential. All rights reserved.
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