Foreign holdings of US Treasury debt increase

[November 17, 2011]  WASHINGTON (AP) -- China bought more U.S. Treasury debt in September and total foreign holdings rose for a second straight month.

Total foreign holdings of Treasury debt increased 1.9 percent to $4.66 trillion, the Treasury Department said Wednesday.

China, the largest foreign holder, bought 1 percent more to bring its total holdings to $1.15 trillion. China had cut its purchases 3.1 percent in August.

The gains suggest foreign demand for U.S. debt remains strong, despite a prolonged debate this summer over increasing the nation's borrowing limit. Investors also don't appear to be concerned that Standard & Poor's downgraded the credit rating on long-term U.S. debt in August.

S&P said it lowered the U.S. credit rating because of politics that slowed the debt limit increase and not because it thought the U.S. couldn't pay its bills. U.S. government debt is still considered a safe investment. It has been in high demand as European debt crisis has intensified.

Japan, the second-largest buyer of Treasury debt, increased its holdings 2.2 percent to $956.8 billion. Britain, the third-largest holder, boosted its holdings 6.1 percent to $421.6 billion.

The 1.9 percent rise in overall holdings followed a 2 percent increase in August. Those two gains came after small declines of 0.4 percent July and 0.3 percent in June. Those declines had been the first overall declines since April 2009.

Net purchases of long-term securities, a category that includes not only U.S. government debt but also bonds sold by U.S. companies, increased by $68.6 billion. That's the biggest gain since November 2010.

[Associated Press; By MARTIN CRUTSINGER]

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