Investors shed euro zone bonds in January

FRANKFURT: Investment flowed out of the euro zone at the fastest pace in three years in January as investors outside the common currency bloc shed debt issued in the area, European Central Bank (ECB) data showed.

Since January, the euro zone debt crisis has calmed and confidence has slowly started to return to markets, suggesting that net outflows may now start to fall again.

Portfolio investments in the euro zone fell 46.9 billion euros, the biggest monthly drop since January 2009, with especially bonds and notes losing investor favour.

“The net outflows for portfolio investment were mainly accounted for by net outflows for debt instruments, which were partly offset by net inflows for equity,” the ECB said in a statement.

“The net outflows for debt instruments resulted mainly from net sales of euro area bonds and notes by non-residents, and from net purchases of foreign bonds and notes by euro area residents,” it added.

Monthly fluctuations are common and analysts said that one month’s data was not enough to alarm them, but that they would watch to see if the trend continued.

“If you look at the trend in the second half of 2011, I’m not sure whether the January figure is concerning,” Deutsche Bank economist Gilles Moec said.

ING economist Carsten Brzeski added: “Looking at the stock market and exchange rates, this (net outflows) may have reversed again.”

In the 12 months to January, the flow of investments into the euro zone exceeded outflow by 189 billion euros, the data showed.