Understanding U.S. Cross-Border Securities Data
Bertaut, Carol C., Griever, William L., Tryon, Ralph W., Gardner, Stephen S., Robison, Jonas J., Federal Reserve Bulletin
In recent years, foreign holdings of U.S. securities have grown markedly. During 2005, reported foreign holdings increased nearly $1 trillion for the second consecutive year, bringing the estimated total to about $7.3 trillion, or roughly 16 percent of all U.S. long-term securities outstanding at year-end. These large numbers are understandably attracting a great deal of attention, as external deficits are a subject of growing concern in today's global economy.
In this article, we present current data on U.S. cross-border securities holdings and transactions and describe the system that collects the data. We discuss how to make the best use of the information available by avoiding common misinterpretations of the data and by adjusting the published figures to improve their accuracy and comprehensiveness. We also discuss how to construct monthly estimates of cross-border securities holdings by country, combining monthly transactions data with less frequently reported positions data. Besides providing more-timely measures of holdings of securities, these estimates incorporate a number of adjustments that improve our overall picture of cross-border portfolio positions. Finally, to improve our ability to correctly attribute U.S. liabilities to foreign holders, we compare our estimates of foreign holdings of U.S. securities with estimates obtained from asset surveys conducted by other countries.
Increasing Importance of foreign holdings of u.s. securities
The increasing importance of foreign holdings of U.S. securities can be seen by comparing the growth of these holdings with the growth of U.S. ownership of foreign securities. Since 1994, when the first survey of U.S. holdings of foreign long-term securities was conducted, foreign ownership of U.S. long-term securities has consistently exceeded U.S. ownership of foreign long-term securities. At the end of 1994, the market value of foreign holdings was approximately 40 percent higher than that of U.S. holdings; by the end of 2005, it was approximately 70 percent higher. The more-rapid growth of foreign holdings of U.S. securities over the past ten years is the counterpart to the record U.S. trade and current account deficits incurred over the period, as the financial inflows associated with the deficits have occurred largely through foreign purchases of U.S. securities.
The trend in foreign holdings relative to U.S. holdings varies by type of security. In recent years, U.S. holdings of foreign equity have been somewhat larger than foreign holdings of U.S. equity (figure 1). For holdings of long-term debt, however, the situation has been very different, as foreign holdings have exceeded U.S. holdings by a wide margin. The disparity can be partly explained by the holdings of foreign official institutions, which are discussed in detail later in this article.
An increase in the level of foreign holdings of U.S. securities has also resulted in an increase in the share of U.S. securities that are foreign held. Since 1974, when surveys began to collect data on foreign ownership of U.S. long-term securities, the share of the total value of U.S. long-term securities held by foreigners has more than tripled, from less than 5 percent to 16 percent as of June 2005 (table 1). As a fraction of the total outstanding, holdings are greatest in Treasuries: More than half of all marketable Treasury securities held by the public are foreign owned. In terms of market value, the level of foreign holdings of U.S. long-term securities increased from $67 billion as of year-end 1974 to $6.3 trillion as of June 2005.
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A similar relationship holds for relative sizes of foreign and U.S. holdings of short-term securities, although the magnitude of these holdings is considerably smaller. Total foreign holdings of U.S. short-term debt securities are more than twice as large as U. …