Foreign holdings of US Treasury debt increase in April to $5.96 trillion despite China cutback

WASHINGTON – Foreign buyers of U.S. Treasury securities increased their holdings in April to another record high even though China cut back on its holdings for a third straight month.

The Treasury Department reported Monday that total foreign holdings rose 0.2 per cent to a record $5.96 trillion, up from $5.95 trillion in March. It marked the ninth consecutive monthly increase.

China, the largest foreign buyer of U.S. Treasury debt, reduced its holdings for a third month, cutting them by 0.7 per cent to $1.26 trillion. Japan, the second largest buyer, boosted its holdings 0.8 per cent to $1.21 trillion.

Foreign demand for U.S. Treasury debt is expected to remain strong this year, helped by more borrowing certainty given the congressional agreement to suspend the debt limit until March 2015.

The agreement on the debt limit means that another standoff over raising the debt ceiling will put off until next year. A standoff in August 2011 rattled financial markets and the political gridlock prompted ratings firm Standard & Poor’s to slightly downgrade its AAA rating of U.S. debt for the first time in history.

The monthly Treasury report showed that holdings by Belgium dropped 3.9 per cent to $366.4 billion while holdings in the Caribbean banking centres including the Bahamas, Bermuda and the Cayman Islands, fell 1.3 per cent to $308.4 billion.

Russia, which had been trimming its holdings of U.S. Treasury debt for five straight months, increased them in April to $116.4 billion, up 15.9 per cent from March but still below the recent high of $149.9 billion last October.