At $131.8 billion, August's headline inflow overstates foreign interest in U.S. securities. Foreign accounts were big buyers of long-term securities in the month, at a net $77.1 billion split between $70.2 billion in private purchases and $7.2 billion of official purchases. But adding significantly to the total was selling by U.S. accounts of foreign long-term securities, at a net $54.7 billion in selling almost entirely centered in foreign bonds that offset marginal buying of foreign equities.
The breakdown of foreign buying shows a sizable $63.1 billion in Treasuries with agency bonds at $16.0 billion and corporate bonds at $14.9 billion. But foreign interest in U.S. equities has been sinking noticeably in recent reports and continued to do so in August, down $16.9 billion.
With trade war a risk, Treasury holdings by Chinese accounts are closely watched and so far there is no indication of retaliation. Yet Chinese accounts did decrease their holdings in August but only slightly, by $6.0 billion to $1.165 trillion. Yet looking back at August 2017, Chinese holdings are down $36.6 billion over the last year. Japanese accounts decreased their holdings in the latest month by more than $5 billion to $1.030 trillion. Brazilian accounts are the next biggest holders of U.S. Treasuries, way back at $318 billion.
Though the headline is skewed, demand for U.S. securities was still solid in August offering a key offset to the nation's stubbornly high trade deficit and increasing government deficit.