Foreign holdings of US Treasury debt rose in November

WASHINGTON – Foreign holdings of U.S. Treasury securities increased in November to the highest point since June, led by a gain from China.

The Treasury Department said Tuesday that total holdings of U.S. government bonds by foreigners rose 1.3 per cent to $6.13 trillion after having fallen 1 per cent in October. It was the highest level since foreign holdings hit $6.18 trillion in June.

China, the largest foreign owner of U.S. government debt, increased its holdings by 0.8 per cent to $1.26 trillion. Japan, the No. 2 holder of Treasury debt, cut its holdings by 0.4 per cent to $1.14 trillion. It was the fourth monthly decline by Japan.

Foreign demand for federal debt is expected to remain strong in 2016, a year when the federal deficit is forecast to rise.

The Congressional Budget Office released a new estimate Tuesday projecting that after six years of declines, this year’s budget deficit will rise to $544 billion. That would be a 23.9 per cent increase from the 2015 deficit of $439 billion, which had been the lowest of President Barack Obama’s time in office.

CBO attributed the increase to higher spending for the Pentagon and domestic agencies, as well as the extension of tax cuts that had expired. These changes were all part of a budget agreement reached between Democrats and Republicans last fall.

The higher deficit will add to the national debt, which currently stands at $18.9 trillion. Foreigners own $6.13 trillion of the debt with two-thirds of that amount held by foreign governments, primarily central banks.