“NEW YORK (Reuters) – Foreigners ditched U.S. equities and cut mortgage-backed debt in October in favor of government bonds, U.S. Treasury data showed on Monday, as market and global economic uncertainty increased.
Overall, overseas investors bought $1.3 billion in long-term U.S. securities, the fewest in at least three years, with much of the selling coming at the expense of stocks and bonds issued or guaranteed by the biggest U.S. mortgage financing agencies.
The shift appeared to reverse the heavy purchases of stocks and mortgage-related bonds seen in September after the Federal Reserve announced plans to start buying $40 billion of mortgage debt per month to cut long-term interest rates and stoke growth.
“It looks like we’re seeing an unwind of the post-QE 3 trade,” said TD Securities U.S. strategist Gennadiy Goldberg, referring to the Fed’s third round of monetary easing, known as quantitative easing, or QE.
When including short-term assets such as bills, Treasury data showed foreigners were net sellers of U.S. assets to the tune of $56.7 billion, the largest outflow since July 2011.
Some of the shift may reflect demand for higher-yielding assets abroad, analysts said. By suppressing rates and flooding the system with dollars, the Fed’s several asset-buying programs have weighed on the greenback and dulled the appeal of dollar-denominated assets…”
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