Foreign holdings of U.S. debt rises to record high

By Martin Crutsinger

AP Economics Writer

WASHINGTON (AP) -- Foreign demand for U.S. Treasury securities rose to a record high in March. China, the largest buyer of Treasury debt, increased its holdings for a third straight month.

Total foreign holdings rose 0.3 percent to a $5.12 trillion, marking the eighth consecutive monthly increase, the Treasury Department reported Tuesday.

U.S. government debt is considered one of the safest investments. Demand has increased as investors worry about the uncertainty surrounding Europe's debt crisis.

China boosted its holdings 1.3 percent to $1.17 trillion, its third straight increase. China had trimmed its holdings for five straight months before the January increase.

Japan, the second-largest buyer of Treasury debt, trimmed its holdings slightly, cutting them 0.2 percent to $1.08 trillion.

Brazil, the third-largest foreign buyer of Treasury debt, increased its holdings in March to $237 billion. Britain reduced its holdings to $112 billion.

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 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.

Published: Wed, May 16, 2012