Foreign holdings of US debt hit record high

[April 17, 2012]  WASHINGTON (AP) -- Foreign demand for U.S. Treasury debt rose to a record high in February. China, the largest buyer of Treasury debt, increased its holdings for the second straight month.

Total foreign holdings rose 0.8 percent to a $5.1 trillion, marking the seventh consecutive monthly increase, the Treasury Department reported Monday.

China boosted its holdings 1.1 percent to $1.18 trillion, its second straight increase. China had trimmed its holdings for five straight months before the January increase. Japan, the second largest buyer of Treasury debt, increased its holdings 1.2 percent to $1.1 trillion.

U.S. government debt is considered one of the safest investments. Demand has increased as investors have looked for a safe haven given Europe's debt problems.

Brazil, the third-largest foreign buyer of Treasury debt, cut its holdings to $225.5 billion. Britain reduced its holdings to $103 billion.

Part of that change reflected Treasury's efforts to better track the ultimate holder of the Treasury bonds. In the past, Britain's holdings were inflated by purchases that occurred on London markets but actually represented holdings by residents of other countries.

Demand for foreign holdings has remained strong despite the first-ever downgrade of the government's debt last August. Standard & Poor's lowered its rating on long-term Treasury debt one notch from AAA to AA+ following a prolonged debate in Congress over increasing the nation's borrowing limit.

The nation's borrowing needs will remain high based on projections of future deficits. The Congressional Budget Office expects the federal deficit will total $1.17 trillion for this budget year, which ends Sept. 30. That would give the country four consecutive years of deficits topping $1 trillion.

[Associated Press; By MARTIN CRUTSINGER]

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