China, others boost holdings of US Treasury debt

China boosted its holdings of United States Treasury debt for the first time in six months.

That development could ease concerns that lagging foreign demand will force the US government to pay higher interest rates to finance its debt.

The US Treasury Department reported Monday that China's holdings of US Treasury securities rose two per cent in March to US$895.2 billion, the first increase since last September.

Total foreign holdings of Treasury securities rose 3.5 per cent to US$3.88 trillion.

The government reported that net holdings of long-term securities, which includes the debt of US companies as well as government debt, rose US$140.5 billion in March, the largest one-month gain on record.

It surpassed the old record of a net increase of US$135.8 billion in May 2007.

Influential factors

The big increase was influenced by two factors - a flight to safety by investors increasingly worried about the debt crisis in Europe and a rebounding US economy which has sparked greater interest by foreigners in purchasing US corporate debt.

Investors have grown nervous about the ability of Greece and other heavily indebted nations to repay their debt.

Last week, European nations and the International Monetary Fund assembled a nearly US$1-trillion support package to convince investors that their bond holdings are safe. But markets have remained nervous.

Net purchases of long-term US debt had increased US$47.1 billion in February after an increase of US$15 billion in January.

Those gains were seen as a good sign that foreigners continue to be interested in US debt securities even in a period when Treasury debt has soared.

China is the largest foreign holder of US Treasury securities. The US$17.7 billion increase in March left its holdings at the highest level since November.

Japan, the No 2 foreign holder of Treasury securities, also increased its holdings in March. It raised them 2.1 per cent to US$784.9 billion.

- AP