NEW YORK (Reuters) - Foreigners snapped up U.S. Treasury bonds and notes for a second consecutive month in March, data from the U.S. Treasury showed on Monday, as it became apparent that the Federal Reserve would take a cautious approach in raising interest rates this year.
The continued decline in oil prices along with sluggish U.S. economic data have pushed back or reduced expectations for a rate hike this year, prompting investors to buy U.S. Treasuries in a world where most sovereign bonds had negative yields.
Overseas investors bought $23.6 billion in U.S. Treasury debt in March, after purchasing $9.9 billion in February, according to the U.S. capital flows data report. March's U.S. Treasury bond inflows were the largest since November last year.
Benchmark interest rates at the beginning of March were 1.8350 percent. By the end of the month, U.S. 10-year yields had declined as low as 1.7690 percent.
Private overseas investors continued their binge of U.S. Treasuries, amassing $41.6 billion in March, after purchases of $60.2 billion the previous month. Over the last five months, private investors have bought nearly $160 billion in U.S. government debt.
The report also showed for the first time U.S. Treasury holdings of Saudi Arabia and other oil-producing countries. Saudi Arabia has the largest Treasury holdings among the Gulf oil exporters with $116.8 billion. United Arab Emirates was second largest holder of U.S. Treasuries with $62.5 billion in March, while Kuwait has $31.2 billion.
China remains the largest holder of U.S. government debt, although its holdings in March declined to $1.244 trillion, from $1.252 trillion in February.
Japan, the second-largest U.S. Treasury debt holder, posted higher U.S. government debt holdings of $1.137 trillion from $1.133 trillion in February. It was Japan's third increase in U.S. Treasury holdings in five months.
Overall, foreign central bank holdings of U.S. Treasuries grew to $6.287 trillion in March, from $6.236 trillion in February.
Data also showed offshore investors purchased $78.1 billion in long-term U.S assets after buying $72.6 billion the previous month. Including shorter-dated securities, however, overseas investors sold $98.3 billion in March, after buying $31.7 billion in February.
U.S. stocks showed outflows for a second straight month, with foreigners selling $16.5 billion in March, from $11.1 billion outflows in February. Foreigners sold U.S. equities in seven of the last eight months.