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Foreign holdings of U.S. Treasuries fall in August -data

Credit: REUTERS/DADO RUVIC

Foreign holdings of Treasuries fell for the first time in four months in August, data from the Treasury department showed on Friday, with China's holdings of U.S. government debt falling to the lowest in more than 3-1/2 years.

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 16 (Reuters) - Foreign holdings of Treasuries fell for the first time in four months in August, data from the Treasury department showed on Friday, with China's holdings of U.S. government debt falling to the lowest in more than 3-1/2 years.

Foreign investors had $7.083 trillion in U.S. Treasuries in August, from $7.097 trillion the previous month.

Both Japan and China, the two largest non-U.S. holders of Treasuries, saw their holdings in August decline to $1.278 trillion and $1.068 trillion, respectively. Japan remains the largest holder of U.S. Treasuries.

China's holdings of Treasuries fell for a third straight month in August. Its Treasury debt holdings were the smallest since February 2017.

The decline in China's holdings wasn't a source of concern for some strategists, however.

"Drops in holdings for Japan and China are at a scale that suggests more position maintenance than anything else," said Ben Jeffery, rates strategist at BMO Capital in New York.

"In the grand scheme of things, the size of their holdings, even the ostensibly large numbers that you see in the release, really don't change anything from a broader macro perspective," he added.

On a transaction basis, U.S. Treasuries showed foreign outflows in August of $33.06 billion, from outflows of $22.79 billion in July. U.S. Treasury outflows persisted in five of the last six months.

"These numbers don't suggest any paradigm shift, or any sea change in the foreign landscape," said Jeffery.

At the height of the coronavirus pandemic, the market saw record Treasury debt outflows of $310.79 billion in March amid liquidity problems for the world's largest bond market.

Benchmark U.S. 10-year Treasury yields ended August at 0.69%US10YT=RR, up from 0.56% at the beginning of the month.

Foreign investors, meanwhile, bought $26.57 billion of U.S. stocks in August, up from $16.49 billion in July. Foreigners have been net buyers of U.S. stocks for four straight months.

In May, foreigners saw record buying of $79.7 billion in U.S. equities.

After a record corporate bond outflow in July of $54.34 billion, the sector saw inflows of $2.3 billion in August.

Data also showed U.S. residents increased their holdings of long-term foreign securities, with net purchases of $5.7 billion in August, compared with net sales of $37.5 billion in July.

Taking into account transactions in both foreign and U.S. securities, net foreign purchases of long-term securities were $27.8 billion for the month of August, compared with inflows of $11.3 billion the previous month, data showed.

(Reporting by Gertrude Chavez-Dreyfuss Editing by Chris Reese and Sonya Hepinstall)

((gertrude.chavez@thomsonreuters.com; 646-301-4124; Reuters Messaging: gertrude.chavez.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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