Foreign Demand For US Treasury Debt Declines



Salon Staff
February 15, 2012 7:36PM (UTC)

WASHINGTON (AP) — Foreign demand for U.S. Treasury debt fell slightly in December after hitting a record high the previous month. A key reason for the drop was that China, the largest holder of Treasury debt, cut its purchases for a third straight month.

Total foreign holdings dipped 0.4 percent in December to $4.73 trillion, the Treasury Department reported Wednesday. It was the first drop in foreign holdings of Treasury debt since July.

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China cut its holdings 2.8 percent to $1.1 trillion. Japan, the second-largest buyer of Treasury debt, increased its holdings 0.3 percent to $1.04 trillion.

U.S. government debt is still considered an ultra-safe investment. And it's been in demand as worries about the European debt crisis have intensified.

That demand has remained strong despite the first-ever downgrade of the government's credit rating. Standard & Poor's lowered its rating on long-term Treasury debt one notch from AAA to AA+ last August following a prolonged debate in Congress over increasing the nation's borrowing limit.

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The nation's borrowing needs will remain high based on the projections in President Barack Obama's latest budget released Monday. The administration estimated that this year's deficit would total $1.33 trillion, marking the fourth consecutive year that the imbalance has topped $1 trillion. The administration projected that the deficit for 2013 would be $901 billion.

The drop in overall Treasury holdings by foreigners came after four consecutive monthly gains.

Britain, the third-largest foreign holder of Treasury debt, cut its holdings 2.6 percent in December to $414.8 billion. A group of 15 oil exporting countries boosted their holdings 0.6 percent to $233.5 billion.


Salon Staff

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