NEW YORK, Sept 18 (Reuters) – Foreigners’ holdings of U.S. Treasuries rose in July, for the second straight month despite a cloudy economic data clouding the outlook for interest rates, Treasury Department data showed on Monday. It increased in
Total U.S. debt holdings in July were $7.655 trillion, up from $7.562 trillion the previous month. Compared to the same period last year, overseas holdings increased by 2.2%.
China’s holdings of U.S. debt fell to $821.8 billion, the lowest level since May 2009, when it stood at $776.4 billion, data showed.
Analysts said the sale of U.S. bonds could have been used as an intervention to prop up China’s weakening currency, the yuan, under pressure to protect it.
The benchmark 10-year Treasury yield started July at 3.858% and rose 9.9 basis points (bps) to 3.957% by the end of the month.
“Even though interest rates were volatile in July, there was a huge amount of money flowing into Treasuries,” said Gennady Goldberg, head of U.S. interest rate strategy at TD Securities in New York.
“Much of the increase in foreign holdings came from the Cayman Islands, Luxembourg and Bermuda, which have ties to custodians, so it’s difficult to know exactly who the buyers are,” he added.
Japan remains the country with the largest national debt outside the United States, at $1.112 trillion in July, up from $1.105 trillion in June.
“We’ve seen some buying by Japanese investors, even though U.S. Treasuries are less attractive on a hedged basis,” Goldberg said. “This suggests that unhedged Treasury purchases may occur.”
Data showed mixed results for major U.S. asset classes during the month.
Net foreign inflows into U.S. Treasuries fell to $200 million in July from $57.3 billion in June.
Net inflows into U.S. stocks from abroad also fell, falling to $28.9 billion in July from $120.4 billion the previous month.
Foreign purchases of U.S. companies and agencies recorded inflows of $8.4 billion and $8.1 billion, respectively, in July.
The data also shows that U.S. residents increased their holdings of long-term foreign securities, net buying $36.8 billion in July.
Reporting by Gertrude Chavez-Dreyfus; Editing by Chris Reese and Sonali Paul
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