Foreign holdings of US Treasury securities fell in August

WASHINGTON – Foreign holdings of U.S. Treasury securities fell again in August as China, the biggest foreign owner of Treasury debt, trimmed its holdings for the third straight month.

The Treasury Department reported Tuesday that total foreign holdings dropped 0.8 per cent to $6.20 trillion in August following a 0.5 per cent decline in July.

China reduced its holdings 2.7 per cent to $1.19 trillion after declines of 1.8 per cent in July and 0.3 per cent in June. Japan, the second largest foreign holder of Treasury debt, reduced its holdings by 0.9 per cent to $1.14 trillion in August.

The Congressional Budget Office forecasts the national debt, now at $19.7 trillion, will increase by $8.6 trillion over the next decade, underscoring America’s need to maintain high foreign demand for the rising levels of Treasury debt.

Last week, the government reported that the deficit for the 2016 budget year ended Sept. 30 totalled $587 billion, up 34 per cent over the previous year. Under President Barack Obama, the government ran deficits topping $1 trillion annually for his first four years in office. But deficits had been declining since then.

China’s holdings of Treasury debt have declined in nine of the past 12 months and now stand 6.7 per cent below where they were in August 2015.

Total foreign holdings of Treasury securities are 1.5 per cent higher than in August 2015.

After China and Japan, the country with the third largest holdings of Treasury securities in August was Ireland at $266.4 billion followed by the Cayman Islands, a foreign banking centre, with $264.2 billion in Treasury securities.