China increases holdings of U.S. Treasury bonds

[teko]

By Martin Crutsinger
Washington Post Staff Writer
Tuesday, May 18, 2010

China boosted its holdings of U.S. Treasury debt for the first time in six months, U.S. officials said Monday. That development could ease concerns that lagging foreign demand will force the United States to pay higher interest rates to finance its debt.

The Treasury Department said that China's holdings of U.S. Treasury securities rose 2 percent in March, to $895 billion, the first increase since last September. The purchases solidified China's position as the world's largest holder of U.S. debt.

Japan, the No. 2 investor, also increased its holdings in March. They rose 2.1 percent, to $784 billion. Total foreign holdings of Treasury securities rose 3.5 percent, to $3.9 trillion.

The government reported that net holdings of long-term securities, which includes the debt of U.S. companies as well as government debt, rose $140 billion in March, the largest one-month gain on record. It surpassed the old record of $135.8 billion in May 2007.

The big increase was influenced by two factors: a flight to safety by investors increasingly worried about the debt crisis in Europe and a rebounding U.S. economy that has made American corporate debt more attractive to foreigners.

Investors have grown nervous about the ability of Greece and other heavily indebted nations to repay their debt. Last week, European nations and the International Monetary Fund assembled a nearly $1 trillion support package in hopes of convincing investors that their bond holdings are safe. But markets have remained nervous.

Stocks dove Monday after the euro hit a four-year low then recovered to close essentially flat.

Gregory Daco, an economist at IHS Global Insight, said that as the Greek debt crisis began to intensify in March, foreign investors sought refuge in the safety of U.S. Treasury bonds and notes. He said the rebound in the U.S. economy was also helping to attract investors to bonds issued by U.S. companies.


The overall U.S. economy, as measured by gross domestic product, grew at an annual rate of 3.2 percent in the first three months of this year. It was bolstered by the strongest gain in consumer spending in three years.

"The strong first-quarter real GDP and productivity growth as well as the recent surge in the dollar should continue to draw in foreign investment," Daco predicted.

Win Thin, senior currency strategist at Brown Brothers Harriman in New York, said he expected investors to continue to favor dollar-denominated assets over holdings in the euro, the common currency of 16 European countries including Greece.

"Given the debt crisis that Europe is struggling with, flight to safety will most likely favor the United States" in the second quarter of this year, Thin said. "Really, would any reserve manager be moving aggressively into euros this past few months?" Net purchases of long-term U.S. debt had increased $47 billion in February after an increase of $15 billion in January.

Those gains were seen as a good sign that foreigners continue to be interested in U.S. debt securities even in a period when Treasury debt has soared.

-- Associated Press

[Barb135]

Do we really know what comes after trillion?  I think it's really something like quadillion, but don't know for sure............

[teko]

For real! LOL  I hear ya!

[Barb135]

"Those gains were seen as a good sign that foreigners continue to be interested in U.S. debt securities even in a period when Treasury debt has soared."

Geez, don't let the government know that foreigners are interested in our debt -- they'll want to borrow some more!!!!             LOL

[teko]

HaHa! Thanks for making me laugh! Sounds like a plan! And the special interest groups they carry around in their pockets too!

[VicUser]

If we forfit on the debt can we give them our politicians?