March 12, 2004

Ask and Ye Shall Receive: Chart of the Day and the Current Account

Yesterday I asked where the balance of payments and current account numbers were. Why? I wanted to know if foreigners bought or sold U.S. investments in the fourth quarter of the last calendar year. Today, the answer. Details: *The current account deficit (combined balances on trade in good and services, income, and net unilateral current transfers) went up $60 billion in 2003--from $480.9 billion in 2002 to $541.8 billion in 2003. *Foreigners purchased $52.8 billion LESS off U.S. securities (excluding Treasury bonds) in 2003 than they did in 2002, from $291.5 billion in 2002 to $238.7 billion last year. *Net foreign purchases of U.S. stocks were down $18 billion, from $55.2 in 2002 to $37.2 in 2003. *Net foreign purchases of U.S Treasury Securities were up 50%, from $96.2 billion in 2002 to $139.3 billion in 2003 Conclusions? Foreigners bought fewer stocks and more U.S. bonds, especially Treasury bonds. Odd, it seems, with the supply of Treasury bonds ever increasing. Then again, the day after we learn the U.S. government posted its largest monthly deficit in history, the dollar rises and Treasury bonds get a "flight to safety" bid. Evidently, it is still a dollar standard world, even though the dirty big secret of American debt is out in the open. With rates still low, a speculator could do worse than buy bond calls. Oh yes, one more fact: in 2002, foreigners purchased $76.3 billion agency securities (mostly Freddie and Fannie bonds, I imagine.) In 2003, net sales of agency bonds were $48.1 billion. Hmm. A $124 billion swing in one year. GSE debt, it's asbestos for the 21st century.


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