Foreign investors sold a record $77.4bn of US Treasuries in December, when broader turmoil in financial markets pushed prices for government debt higher.
The selling activity came from both official institutions like central banks and private foreign investors. The Cayman Islands, typically associated with hedge fund trading, sold the most of any country, shedding $31.5bn. Funds typically sell assets into year end, taking profits and closing out trades before the new year.
It also coincided with the Federal Reserve raising interest rates the fourth time in 2018 and remaining relatively hawkish. The prospect of further tightening of monetary policy, which would have pushed borrowing rates higher, fuelled the sharp sell-off in stock markets during much of the December quarter, as well as volatility in bond markets.
China, the largest foreign holder of Treasuries, sold $16bn, extending a four month long run of selling beginning in August. However, because of the rally in Treasury prices, the country’s total holdings grew slightly to $1.123tn.
The same was true for other large sellers. Brazil sold $11.3bn and the United Kingdom sold $7.7bn but both country’s saw their holdings increase. Overall, total foreign holdings of Treasuries increased by $65.5bn to $6.265tn.
Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.