May 15, 2020 / 8:07 PM / 11 days ago

U.S. Treasuries saw record foreign selling in March: data

NEW YORK (Reuters) - Foreign investors sold a record amount of U.S. Treasury bonds and notes for the month of March, according to Treasury Department data on Friday, as the coronavirus pandemic caused a dislocation in the market that saw liquidity all but dry up.

On a transaction basis, foreigners sold $299.346 billion in Treasuries in March, a record high, compared with foreign buying of $4.885 billion in February.

Liquidity in the $17-trillion U.S. Treasury market worsened in March amid a large-scale liquidation of bonds in the midst of the fallout from the virus outbreak. That forced the Federal Reserve to intervene and undertake massive buying of Treasuries to stabilize the market.

“It was a pretty large liquidation from a lot of the foreign accounts,” said Gennadiy Goldberg, senior rates analyst at TD Securities in New York. “And it makes a lot of sense because there was a lot of precautionary liquidation given all the uncertainty, especially in emerging market economies.”

U.S. 10-year yields hit a record low of 0.3180% US10YT=RR in March, ending the month at 0.6990%.

Overall, foreign holdings of U.S. Treasuries declined by more than $250 billion in March to $6.81 trillion, after hitting an all-time peak of $7.066 trillion the previous month.

Japan’s Treasury holdings, however, hit a lifetime high of $1.271 trillion in March, from $1.268 trillion in February. Japan remains the largest non-U.S. holder of Treasuries.

China, the second largest holder of Treasuries, sold Treasuries for the first time in three months. The country’s holdings fell to $1.081 trillion, from $1.092 trillion in February.

Analysts said China’s central bank seemed to have sold Treasuries to support its weakening currency, which has been pressured by the economic impact from the virus.

Saudi Arabia was one of the biggest sellers of Treasuries in March, with its holdings dropping to $159.1 billion, a two-year low, from $184.4 billion in February.

Overall, countries around the world were selling Treasuries to boost their finances as they battle the pandemic shock.

The report also showed foreigners bought $6.812 billion of U.S. stocks in March, compared with purchases of $11.516 billion the previous month. U.S. stocks have posted net inflows for five straight months.

Foreign investors also bought $3.177 billion in U.S. corporate bonds in March, after selling $20.515 billion of these assets the previous month, according to the data.

Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio and Leslie Adler

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