Foreign accounts were big sellers of U.S. Treasuries in December, making for a $12.9 billion net outflow of long-term securities in the month. Driven by selling in private accounts, foreigners sold a net $21.8 billion of Treasuries in the month to more than offset continued strong buying in government agency bonds where the net inflow totaled $13.7 billion.
Foreigners were modest buyers of corporate bonds in the month but were big sellers of U.S. equities at a net $10.0 billion. A slight plus for the month's cross-border flow was net selling of $1.1 billion of foreign long-term securities by U.S. accounts.
Turning back to Treasuries, Japanese accounts decreased their holdings by $17.8 billion to $1.09 trillion while Chinese accounts, which are the second largest holders of U.S. Treasuries, increased holdings by $9.1 billion to $1.06 trillion.
The U.S. needs inflows of securities purchases, not outflows, in order to offset large trade and government deficits.