China the larger holder of U.S. Treasury securities

Sunday, 17 April 2011 05:24

China the larger holder of U.S. Treasury securities reduced its holdings for a fourth straight month in February a treasury report has shown. China's position is now $1.15 trillion down by almost 600million. On the other hand Japan which is the second largest foreign holder increased its holdings by $4.4 billion to $890.3 billion yet due to the March earthquake and tsunami Japan may reduce its purchases in order to use the money for internal reconstruction.

Total foreign holdings increased 0.5 % to $4.47 trillion. Yet as the government moves closer to the $14.3 trillion debt limit it will have to scale back future sales unless Congress moves to raise the limit. The government will hit its current limit no later than mid May yet it will be able to avoid a default on the national debt for possibly another couple of months though various actions.

Republicans in Congress will not agree to a new debt limit without further concessions on government spending. Obama put forward a new plan last week to trim the deficit by $4 trillion over the next 12 years yet it was rejected by republicans because it would raise taxes on the wealthy.

The report also showed that the looming debt ceiling battle was not having any impact on foreign demand for Treasury debt. The 0.5 % gain in overall holdings that month followed a 0.3 % increase in January. After China and Japan, Britain is the third-largest holder of U.S. Treasury securities holdings jumped 63 % in February to $295.5 billion.