Foreign holdings of U.S. long-term securities rise in May

09:20, July 19, 2011      

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Total foreign holdings of U.S. long-term securities in May reached 4.514 trillion U.S. dollars, up from 4.4891 trillion dollars in April, the U.S. Treasury Department reported on Monday.

The figures reflect demand for U.S. Treasury obligations and other assets including stocks and government agency debt, key to funding the massive U.S. balance of payments deficit with the rest of the world.

According to the Treasury International Capital report, China, the largest holder of U.S. Treasury securities, increased its holdings by 7.3 billion dollars to 1.1598 trillion dollars in May from the previous month.

Japan, the second largest foreign holder of U.S. government debt, also boosted its holdings from 906.9 billion dollars in April to 912.4 billion dollars in May.

Britain, the third largest holder, increased its holdings to 346.5 billion dollars in May from 333 billion dollars in April.

The debt figures are closely watched at a time when more and more investors believe that the U.S. soaring debt is unsustainable.

The world's largest economy has hit the 14.29-trillion-U.S.-dollar legal ceiling on borrowing and the U.S. Treasury is taking extraordinary measures to buy some time prior to Aug. 2 for Democrats and Republicans to reach a deal and ward off the default risk.

U.S. federal budget deficit reached 1.29 trillion dollars in the fiscal year 2010 ended September 30. It recorded a historic high of 1.42 trillion dollars in fiscal year 2009 when the economy was hit deeply by the financial crisis.

According to President Barack Obama's fiscal year 2012 budget, the U.S. federal deficit in 2011 is expected to hit a new record of 1.65 trillion dollars.

In recent days, the debt limit and deficit cut battle has been shown on the Washington political stage.

Although both parties stressed that the debt reduction should be "balanced" in nature, they are unwilling to take on their own sacred cows, slowing the negotiation process and making the markets increasingly impatient.

Obama highlighted the new investments to shore up short-term economic growth and pressed for heavier taxes on the wealthy, while Republicans pushed for no new taxes and steep budget cutting to honor their mid-term election promises.

Analysts say that the Monday report shows that foreign investors didn't lose their confidence for U.S. government debt in May, even though the United States reached its borrowing limit on May 16.

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