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Non-Euro Investors Dump €192 Billion of Bonds: First Annual Outflow in History, Euro-Area Buys US Assets

Courtesy of Mish.

In 2016, non-euro investors dumped euro-denominated bonds for the first time in history.

Moreover, euro-area investors barely made purchases according to the ECB’s analysis of euro area net portfolio investment outflows.

Annual net purchases of non-euro area debt securities by euro area investors totaled €364 billion in 2016, only slightly below the all-time high of €382 billion that was recorded in 2015. However, this masks the fact that the fourth quarter of 2016 saw euro area investors become net sellers of non-euro area debt securities, the first time this had happened since the second quarter of 2012.

Net sales of non-euro area debt securities totaled €26 billion in that quarter. Euro area residents’ net investment in non-euro area equities remained subdued in 2016, totaling €12 billion.

Non-euro area investors were net sellers of euro area debt securities in 2016 – the first time that had happened since the introduction of the euro. Their net sales of euro area debt securities totaled €192 billion in 2016, compared with net purchases of €30 billion in 2015.

Euro-Area Investors Shift Towards US

The non-euro area investment community dumped euro-denominated bonds but euro-area investors did not pick up the slack.

Euro area investors also become net sellers of non-euro area debt securities in the fourth quarter.

Instead, euro-area investors shifted to the US.

According to data available for the first three quarters of 2016, euro area residents’ net purchases of non-euro area debt securities in that period consisted almost exclusively of long-term debt instruments and largely reflected transactions by “other financial corporations”. This group of corporations – which includes investment and pension funds, as well as insurance companies – accounted for around 74% of the euro area’s net purchases of non-euro area debt instruments in that period, with “other private entities”2 and MFIs excluding the Eurosystem accounting for 14% and 7% respectively. Around 40% of the non-euro area debt securities that were purchased by euro area residents were issued by non-euro area governments, with securities issued by non-euro area MFIs, other financial corporations and other private entities accounting for the remainder (around 20% each).

Investors Dump Italian, German Bonds


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