Fall in US Treasury debt held by China
Source: Agencies |
July 17, 2010, Saturday
|
Print Edition
Print Edition
CHINA reduced its holdings of United States Treasury debt in May as total foreign holdings of US government debt posted a slight increase.
China's holdings fell by US$32.5 billion to US$867.7 billion, the Treasury reported yesterday. Total foreign holdings edged up US$5.8 billion to US$3.96 trillion.
The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of US Treasury debt, responding to fears over the European debt crisis.
China is the largest foreign holder of Treasury securities. The 3.6 percent drop in China's holdings in May will likely raise concerns that China could shift money away from Treasury securities. That could raise the cost of financing America's soaring budget deficits.
Japan, the world's second-largest holder of Treasury securities, also cut its holdings in May, to US$786.7 billion. That's a drop of 1.1 percent from April.
Closely watched
The UK, the third-largest holder, posted a 9 percent rise. Its Treasury holdings rose to US$350 billion.
The Treasury reported that net purchases of long-term securities, covering US government debt and that of US companies, increased by US$35.4 billion in May. That followed gains of US$81.5 billion in April and US$141.4 billion in March.
Foreign holdings of US debt are closely watched because they can indicate the direction of US interest rates. The financial crisis pushed US interest rates down significantly after foreign investors rushed to the safety of US government bonds.
That development helped reduce the cost of financing federal budget deficits, which have soared under the impact of the government's efforts to deal with a severe recession.
The federal deficit hit an all-time high of US$1.4 trillion last year and is forecast by some economists to total US$1.3 trillion this year.
China's holdings fell by US$32.5 billion to US$867.7 billion, the Treasury reported yesterday. Total foreign holdings edged up US$5.8 billion to US$3.96 trillion.
The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of US Treasury debt, responding to fears over the European debt crisis.
China is the largest foreign holder of Treasury securities. The 3.6 percent drop in China's holdings in May will likely raise concerns that China could shift money away from Treasury securities. That could raise the cost of financing America's soaring budget deficits.
Japan, the world's second-largest holder of Treasury securities, also cut its holdings in May, to US$786.7 billion. That's a drop of 1.1 percent from April.
Closely watched
The UK, the third-largest holder, posted a 9 percent rise. Its Treasury holdings rose to US$350 billion.
The Treasury reported that net purchases of long-term securities, covering US government debt and that of US companies, increased by US$35.4 billion in May. That followed gains of US$81.5 billion in April and US$141.4 billion in March.
Foreign holdings of US debt are closely watched because they can indicate the direction of US interest rates. The financial crisis pushed US interest rates down significantly after foreign investors rushed to the safety of US government bonds.
That development helped reduce the cost of financing federal budget deficits, which have soared under the impact of the government's efforts to deal with a severe recession.
The federal deficit hit an all-time high of US$1.4 trillion last year and is forecast by some economists to total US$1.3 trillion this year.
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