Foreign investment in the US unexpectedly grew through April as the Fed’s policy regime enticed purchases of government debt and the slow recovery of the battered financial markets guided capital back towards the largest market in the world. According to the Treasury Department’s statistics, net foreign purcahses of US assets rose $115.1 billion through the period - curbing forecasts for a contraction and marking the largest inflow of investment capital since May of 2007. Looking to the breakdown, it was clear that international investment trends were still seeking safe harbor in the world’s most liquid markets and most liquid assets. With the Fed’s ongoing efforts to prevent any more Bear Stearns-like near collapses, through periodical injections and the development of policy that would prevent future financial market disruptions of a similar magnitude, traders looked to place their money in American assets. However, risk aversion is clearly still an overwhelming concern. With global equities still on the decline through April, foriegn investment in US stocks actually fell for the first time in months by $15.86 billion. On the other hand, with caution on the rise and rates on the decline, demand for treasury bonds and notes jumped $80.28 billion - the largest jump in months - while purchases of coprorate debt rebounded by a hearty $25.09 billion. These trends will more difficult to sustain in more recent months however as risk appetite has become more selective across the market and the Fed has marked a clear change in its rate outlook. - John Kicklighter, Currency Analyst for DailyFX.com