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Foreign holdings of Treasury debt rose in June

WASHINGTON – Foreign holdings of U.S. Treasury securities rose in June after falling in the two previous months.

The Treasury Department reported Monday that total foreign holdings climbed 1.1 per cent in June to $6.28 trillion after declining 0.5 per cent in May and 0.8 per cent in April.

Japan, the second-biggest foreign owner of Treasury securities, increased its holdings by 1.3 per cent to $1.15 trillion. That helped offset a reduction by China, the top foreign owner of Treasury debt, which trimmed its holdings in June by 0.3 per cent to $1.24 trillion.

Ireland ranked third in foreign ownership of Treasury debt. It boosted its holdings 4.2 per cent to $270.6 billion. The Cayman Islands, an offshore banking centre, ranked fourth, expanding its holdings by 3.5 per cent to $269.4 billion.

The national debt stands at $19.37 trillion and is projected to increase in coming years as the annual budget deficits rise, reflecting the higher costs of financing Social Security and Medicare for retiring baby boomers. That rising debt burden means the United States will need foreigners to keep buying Treasury securities.

Of the debt total, $14 trillion is publicly traded on financial markets. The rest is money the government owes itself, including holdings in the Social Security trust fund.

Foreigners own about 45 per cent of the publicly traded debt. Most of those holdings — more than $4 trillion — belong to foreign governments, primarily central banks. They see Treasury securities as one of the world’s safest investments.