US Foreign Securities

The US Treasury published its annual report yesterday on US holdings of foreign securities. It is a preliminary report and the final one is expected in late October.

The basic conclusion was that at the end of last year, Americans owned roughly $6 trillion of foreign equity and debt instruments. Unlike most foreign investors, when Americans invest in foreign markets, they have traditionally preferred equity over fixed income. Roughly 3/4 of the foreign securities they own are equities. The remaining $2 trillion was largely accounted for by long term debt securities (defined as original term-to-maturity) of more than 1 year. Shorter term instruments accounted for about $400 bln. At the end of 2008, estimated US foreign securities holdings at $4.3 trillion, with $2.7 trillion in foreign stocks and $1.3 trillion in foreign bonds; leaving $300 bln in short-term debt instruments.

In terms of country exposures, the UK is by far the largest in equity at about $562 bln. The next closest is Japan at $371 bln, followed by Canada and Switzerland at just below $300 bln each.

Looking at long-term debt, the UK is again the favored destination with $240 bln, followed by Canada with $220 bln. The UK also leads in short-term debt holdings by Americans at $156 bln. Second place goes to Australia with about $41 bln.