China trims holdings of US Treasury debt

AP News
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Posted: Dec 15, 2011 9:55 AM
China trims holdings of US Treasury debt

China bought less U.S. Treasury debt in October and total foreign holdings dipped for the first time since July.

Total foreign holdings of Treasury debt edged down 0.1 percent to $4.66 trillion, the Treasury Department reported Thursday.

China, the largest foreign holder, bought 1.2 percent less to bring its total holdings to $1.13 trillion. China had increased its holdings 1 percent in September after a reduction of 3.1 percent in August.

The small decline in overall holdings still left them at high levels that suggest foreign demand for U.S. debt remains strong. That strength comes despite a prolonged debate this summer over increasing the nation's borrowing limit. Investors don't appear to be concerned that Standard & Poor's downgraded the credit rating on long-term U.S. debt in August.

S&P said it lowered the U.S. credit rating because of political gridlock in Washington that had slowed the debt limit increase and not because the ratings agency thought the U.S. couldn't pay its bills. U.S. government debt is still considered a safe investment and it has been in high demand as worries about the European debt crisis have intensified.

Japan, the second-largest buyer of Treasury debt, increased its holdings by 2.3 percent in October to $979 billion. Britain, the third-largest holder, reduced its holdings 3.1 percent to $408.4 billion.

The 0.1 percent dip in overall holdings followed a 1.9 percent rise September and a 2 percent gain in August. Overall foreign holdings of Treasury securities had fallen 0.4 percent in July and 0.3 percent in June. Those declines had been the first overall declines since April 2009.

Net purchases of long-term securities, a category that includes not only U.S. government debt but also bonds sold by U.S. companies, showed a net increase of $4.8 billion in October after a $68.3 billion gain in September.