Ahead of the Bell: Foreign holdings of US debt

AP News
Posted: Mar 15, 2012 3:56 AM
Ahead of the Bell: Foreign holdings of US debt

The Treasury Department on Thursday will issue its report on foreign holdings of U.S. debt for the month of January.

The report is expected at 9 a.m. ET. The department has said foreign demand for U.S. Treasury debt fell slightly in December, as total foreign holdings dipped 0.4 percent to $4.73 trillion. Those holdings had reached a record of $4.75 trillion in November after four straight months of gains.

Overall demand for Treasury debt has remained strong, but China has reduced its holdings in each of the last three monthly reports. In December China cut its holdings 2.8 percent to $1.1 trillion.

Japan is the second-largest owner of U.S. debt with $1.04 trillion as of December, followed by Britain with $414.8 billion. Japan made a small increase to its holdings in December while Britain reduced its holdings.

U.S. government debt is considered an ultra-safe investment. Even though Standard & Poor's downgraded the government's credit rating in August, U.S. debt has been in demand as worries about the European debt crisis have intensified.

Standard & Poor's lowered its rating on long-term Treasury debt by one notch to `AA+' from `AAA' in August following a protracted debate in Congress over increasing the nation's borrowing limit. That was the first time the government's credit had ever been downgraded.

The nation's borrowing needs will remain high based on projections in President Barack Obama's latest budget. In February the administration estimated that this year's deficit would total $1.33 trillion, which would be the fourth consecutive year that the imbalance surpassed $1 trillion. The administration projected that the deficit for 2013 would decrease by $901 billion.