The Bronze Seal of the Treasury Department is displayed on the U.S. Treasury Building in Washington, USA, on January 20, 2023.REUTERS/Kevin Lamarque/File Photo Obtaining license rights
NEW YORK (Reuters) – Foreign holdings of U.S. Treasuries in August reached the highest level since December 2021, increasing for the third straight month, the Treasury Department showed on Wednesday.
Total U.S. debt holdings in August were $7.707 trillion, up from $7.655 trillion the previous month. Compared to the same period last year, overseas holdings increased by approximately 2.8%.
Japanese investors increased their holdings in U.S. Treasuries to $1.116 trillion from $1.112 trillion in July. Holdings in August were the highest since April and increased for the third consecutive month.
Japan remains the largest holder of US government debt outside the US.
“There is still some buying from foreign investors,” said Gennady Goldberg, head of U.S. rates strategy at TD Securities in New York. Actually that’s not the case.”
“The bigger concern is that they could exit in the coming months, especially as deficits widen, which is making many investors nervous,” he added.
China’s holdings of U.S. Treasuries fell further in August to $805.4 billion, the lowest level since May 2009, when they stood at $776.4 billion, the data showed.
Some analysts said China may be under pressure to keep the yuan weak and that the sale of U.S. debt could have been used to intervene to support the yuan.
“It’s unclear whether this is for monetary purposes because China’s foreign exchange reserves have not declined, but this is strange,” Goldberg said.
“It’s very difficult to know why their holdings have declined so much, but it may certainly be to stabilize the currency.”
The benchmark 10-year Treasury yield began August at 4.047% and ended the month at 4.019%.
The data also showed that capital flowed into major US asset classes during the month.
On a traded basis, U.S. Treasuries recorded inflows of $22.1 billion in August, up from outflows of $4.4 billion in July.
Inflows into U.S. stocks totaled $500 million, down from $28.9 billion in July and $120.4 billion in June.
Foreign purchases of U.S. companies and agencies continued in August, with inflows of $24.6 billion and $14 billion, respectively.
Overall, foreign residents increased their holdings of U.S. long-term securities in August. The net purchase price was $61.3 billion, according to U.S. Treasury data.
Report by Gertrude Chavez-Dreyfuss.Editing: Jonathan Oatis and David Gregorio
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