Overseas Holdings of US Treasury Debt Top US$6trn

Overseas buyers of US Treasury securities increased their holdings in June, with the total topping US$6 trillion for the first time.

Total foreign holdings rose 0.6% to US$6.01 trillion, up from US$5.98 trillion in May, the US Treasury Department said in its monthly report. The increase came despite the fact that the two biggest foreign owners of US Treasury securities reduced their holdings slightly.

China, the top foreign buyer of US Treasury debt, trimmed its holdings by 0.2% to US$1.27 trillion after a 0.6% increase in May. Japan, the second-biggest foreign buyer, saw a very slight decrease of US$600m in its holdings to US$1.22 trillion. Belgium, Brazil and Taiwan were among the countries increasing their holdings.

The world’s central banks are major holders of US Treasuries, which are viewed as one of the world’s safest investments. In June, foreign government holdings of US Treasury debt totaled US$4.1 trillion, two-thirds of the total foreign holdings.

Overseas demand for US Treasury debt is expected to remain strong this year, helped by a congressional agreement to avoid a new fight over the US debt ceiling until March 2015. An earlier political standoff in August 2011 caused volatility in the financial markets and the subsequent gridlock led the credit ratings agency Standard & Poor’s (S&P) to downgrade its AAA rating of US debt for the first time in history.

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