Foreign accounts were once again big buyers of U.S. long-term securities in December, at $34.3 billion and well above the $7.0 billion in net buying of foreign securities by U.S accounts. The difference is a headline $27.3 billion in net inflow vs an unrevised and strong $57.5 billion in November.
Foreign demand for equities was very pronounced going into year-end, at $35.0 billion in December vs $12.6 billion, $12.3 billion and $26.2 billion in the three prior months. Foreign accounts are usually strong buyers of U.S. Treasuries but not for the last several reports with December coming in at net foreign selling of $16.0 billion. But U.S. agency bonds were demand, up $16.4 billion, with corporate bonds down $1.3 billion.
U.S. accounts were buyers of foreign equities, at $8.3 billion, and sellers of foreign bonds at $1.4 billion. Looking at foreign ownership of Treasuries shows China increasing their holdings by $8.3 billion to $1.18 trillion and Japan cutting theirs by $22.6 billion to $1.06 trillion.
It will be interesting to see how foreign investors responded to the market gyrations in January and whether they cut their holdings in U.S. equities and whether their demand for Treasuries improved. But going into the new year, foreign buyers were active participants in the stock market rally. Note that financial inflows help offset the nation's large trade gap and rising government deficit.