Capital Inflows Rise Well Above Forecast in Sept.

WASHINGTON – Net flows of foreign capital into U.S. assets surged unexpectedly to a record $101.9 billion in September, easing fears the United States will be unable to fund its trade gap, a government report showed Wednesday.

Analysts polled by Reuters expected net inflows of $72.5 billion. Inflows were more than enough to cover the record high U.S. trade deficit of $66.1 billion in September.

"It definitely dispels any worries that people will have about funding the American trade deficit," said David Powell, an analyst for IDEAGlobal in New York.

Net capital inflows, excluding foreign stocks and bonds, climbed to a record high $118.1 billion from August's $87.9 billion, the Treasury Department said in its monthly international capital data.

Private net purchases of U.S. assets were at a record high $113.8 billion in September, led by $48.9 billion in net purchases of corporate bonds.

Official net purchases of U.S. assets were down slightly to $4.3 billion from $4.4 billion in August as official sources became net sellers of U.S. Treasuries, shedding a net $1.1 billion after buying $3.2 billion in August.

All foreign net purchases of U.S. corporate bonds rose to $51.1 billion in September from $40.2 billion the month before.

While markets watch the inflow data keenly as a measure of foreign investors' appetite for U.S. assets, the Treasury Department says its report does not fully reflect the nation's ability to fund its trade deficit because it does not include direct investment or bank accounts.

Analysts said they expected September's inflows to be the peak for the year.

"We are borrowing a lot, but it shows a lot of confidence in the U.S. economy, " said Kurt Karl, U.S. chief economist for Swiss Re in New York.

Foreign purchases of U.S. equities jumped to $24.6 billion in September from $3.8 billion in August on a surge in private buying.

Foreign buying of U.S. agency bonds also climbed to $20.7 billion in September from $15.7 billion the preceding month.