Investor demand for US
corporate debt (2003)
| Source: CreditSights |
Political divisions over the Iraq war may have finally led to the much-touted buyers' strike by foreign investors in US assets, according to recent data from the US Treasury about foreign purchases of US debt.
Data for February, when tension between countries such as France and Germany and the US was peaking, showed purchase levels were well below last year's monthly average. There was net foreign selling of US treasuries of $4.7 billion, something not seen since last August. Net foreign purchases of agency debt were almost half of last year's monthly average at $8.6 billion.
The first indications were that the war was having no impact on investment decisions. In fact, in January, foreigners purchased $23.4 billion-worth of US corporate debt - the highest level since May 2002. This was partly a response to the surge of primary issuance at the beginning of the year but was still beyond expectations. As Louise Purtle, head of US credit strategy at independent research firm CreditSights, says: "The tendency for investors to pull back from the US market was much more evident in the second quarter of 2002 when the accounting scandals were really apparent in the US."