Foreign holdings of US Treasury debt up in March

AP News
Posted: May 15, 2013 2:06 PM

WASHINGTON (AP) — Foreign demand for U.S. Treasury securities rose to a record level in March, signaling further confidence in U.S. debt.

The Treasury Department said Wednesday that total foreign holdings increased 0.7 percent in March from February to $5.76 trillion. Holdings have increased nearly 11.9 percent in the 12 months that ended in March.

Demand increased even though the two largest buyers of U.S. debt reduced their holdings slightly in March.

China trimmed its holdings 0.1 percent to $1.25 trillion. Japan also cut its holdings 0.1 percent to $1.11 trillion.

The third-largest buyer, a group of five Caribbean nations that includes the Bahamas and the Cayman Islands, boosted its holdings 3.9 percent to $291.3 billion.

U.S. Treasurys are in demand with foreign buyers just as the U.S. government's financial picture is improving.

The Congressional Budget Office on Wednesday projected that the annual federal deficit will be just $643 billion when the budget year ends on Sept. 30. That's $202 billion lower than the CBO's last estimate in February.

If correct, it would be the first time in five years that the annual deficit came in below $1 trillion. It would still be the fifth-largest deficit in history.

The deficit is getting smaller in part because modest economic growth and higher tax rates have boosted revenue. And the government is expected to receive large dividend payments in June from mortgage giants Fannie Mae and Freddie Mac.

A narrower deficit is likely to push a debate over increasing the nation's $16.39 trillion borrowing limit off until the fall.

Congress temporarily suspended the borrowing limit earlier this year but that suspension ends this weekend. The Treasury Department can keep the government operating for several months after that by employing various bookkeeping maneuvers to provide room for more borrowing.