14:05 US GOVTS: TIC Data Showed Slower Fgn Investment in Oct ($48.1B)] Boston, Dec 15-- According to the Treasury International Capital (TIC) report foreigners made a $48.1 bln net purchase of US securities in October, down from a revised $59.9 bln in September (prev. $63.4 bln). There was a rise in foreign appetite for Treasuries but it was well shy of its highs of earlier in the year. There was a rebound in agency purchases as well as equities. On average inflows are still sufficient enough overall to cover the current account deficit but the market will keep a watchful eye as the USD remains weak. At their October pace net investment is insufficient to support the USD. Foreign net purchases of US Treasuries totaled $18.3 bln in October, up from $15.8 bln in September. Purchases by foreign official institutions rose by more than 50% to $14.8 bln from $9.8 bln in September. Other foreigners purchases fell to $3.0 bln from $6.7 bln. Foreign official holdings totaled $1.125 trn in October, up from $1.115 trn in September. The rise was a result of increased investment in Treasury coupons. Overall foreigners hold a little less than 48% of all marketable Treasury debt outstanding. Foreign central bank holdings of notes and bonds account for about 33.5% of all notes and bonds outstanding. It"s not hard to see why the market remains preoccupied with foreign sponsorship. In the 12 months ending in October, foreign investors made a $374.9 bln net purchase of Treasuries, up from $368.4 bln in September. It was just the second time that the 12-month purchase had risen in the past six months. Foreign official accounts made a $207 bln net purchase of Treasuries over the year ending in October. This year alone that purchase has totaled $176.7 bln compared with a total net purchase of Treasuries of $109.3 bln in all of last year. So far this year total marketable Treasuries outstanding increased by $325.3 bln, and note and bonds have increased by only $175.7 bln. The degree of sponsorship by foreign investors is one reason why rates have stayed low even as the budget deficit has soared. Of the major foreign holders of Treasuries, the composition changed. Japan and trimmed their holdings for a second straight month while the UK increased theirs by just over $6 bln. China"s holdings were little changed. Since peaking in August Japan has decreased their holdings of Treasuries by $7 bln through the end of October. The Japanese held $715.2 bln in Treasuries as of October 31, down from $720.3 in September and $722.2 bln in August. Their holdings equate to about 18% of total marketable Treasuries outstanding. China"s stake was $174.6 bln in October, ups lightly from $174.3 bln in September. The UK increased their holdings to $140.9 bln from $134.7 bln. This looks to be a new high. Holdings of Treasuries by Caribbean Banking Centers-- a fair proxy for hedge funds-- fell by just over $3 bln in October to $85.2 bln. Foreigners made a $22.0 bln purchase of agency securities, the strongest purchase since April. This occurred after the dust settled following the OFHEO"s investigation of FNMA manipulating its earnings. Fed custody holdings suggest that agency investment by foreign central banks has stayed strong. In October there was a $19.1 bln purchase of corporate bonds, down sharply from $43.9 bln in September. There was a $3.76 bln net purchase of US equities following a $3 bln net sale in September. At the same time US investors sold a net $12 bln in foreign stocks and a $3.2 bln in foreign bonds. Complete details can be found on the Treasury"s website at: http://www.treas.gov/tic/. The report reinforces rhe importance of foreign investors to the US Treasury market suggests that the twin deficits -- the budget deficit and the current account-- will be of utmost important in the coming year. The current account is approaching a record 5.5% of the GDP and if it continues to deteriorate foreign inflows may slow. This would spell trouble for the US markets, as well as the economy. --Jennifer.Rossum@thomson.com [TIC YEAR-TO-DATE SUMMARY, mlns$] ------Foreign investment in------------- Treasury Gov't U.S. U.S. TOTAL Bonds & Agency Corp. Corp. NET FGN Notes Bonds Bonds Stocks INVESTMENT 2004-01 48997 27377 12809 12828 91276 2004-02 36705 24247 21051 2488 84638 2004-03 60799 4004 30613 -13481 77598 2004-04 35673 31798 16559 -1922 71782 2004-05 23378 20959 19817 -7679 64974 2004-06 40575 15769 27156 1755 73007 2004-07 13250 19279 28180 9777 61066 2004-08 14427 17489 24430 -1126 54228 2004-09 15779 8095 43930 -3068 67463 2004-10 18338 22002 19154 3760 48063