- ‘Tis the Season: London florist creates $4.6 million Christmas wreath
- No tailgating allowed at Super Bowl XLVIII
- Pentagon to transport African troops to Central African Republic
- Chinese man fed up with his girlfriend’s shopping jumps to his death
- Ukraine leader to talk with protesters; Washington urges caution
- Pope Francis: A nun saved my life
- Israeli P.M. Netanyahu backs out of Mandela funeral
- Elian Gonzalez makes first trip outside Cuba since custody battle
- U.S., British intelligence agents enter online sci-fi world to spy on gamers
- Sarah Palin to host the outdoors show ‘Amazing America’
Foreigners cut holdings in Treasury debt in June
In an ominous sign, foreign investors cut their holdings of U.S. Treasury debt in June for the first time in more than two years. The decline came at a time of anxiety about whether the United States would raise its borrowing limit.
China, the biggest buyer of U.S. Treasury debt, increased its investment for a third straight month. But Japan, the second-largest buyer, along with Brazil, Russia, Hong Kong, and a group that includes the Bahamas, Bermuda, the Netherlands and the Cayman Islands cut their holdings of U.S.-government-backed debt.
Overall, foreign holdings dropped 0.4 percent to $4.5 trillion. It was the first decline since April 2009.
Much of the decline was driven by private investors. Their net purchases of long-term U.S. Treasurys fell a record $18.3 billion in June. Net purchases are the difference between what investors buy and sell in one month.
The decline lowered private investors’ overall foreign holdings by $15.1 billion.
Overall foreign holdings of governments, which include central banks, dropped only $1.7 billion. Governments account for roughly 72 percent of total foreign holdings of U.S. Treasury debt.
Congress and the Obama administration reached a deal on Aug. 2 that would allow the U.S. government to increase its $14.3 trillion borrowing limit by more than $2 trillion. It was approved hours before the U.S. faced a potential default on its debt.
The full increase is dependent on lawmakers reaching agreement on an equal amount of cuts to the deficit over the next decade. Up to $1.5 trillion of those cuts must be negotiated by a special committee of lawmakers over the next three months.
The total deficit cuts fell short of the $4 trillion in cuts that Standard & Poor’s said was needed to achieve a credible deficit-reduction plan. As a result, S&P downgraded the U.S. government’s credit rating from AAA to AA+.
The two other leading private credit-rating agencies did not downgrade the U.S. credit rating, although all three services say there are worrisome trends in the long-term federal financial position.
Economists said investors likely worried about how the debate in Washington would be resolved, and those worries contributed to the overall decline. Many economists expect foreign holdings will drop further in July because the borrowing limit was not raised until August.
However, they predict foreign holdings will increase in August. Congress approved an increase in the borrowing limit, and Europe’s debt crisis has made U.S. Treasurys, even with all the turmoil in Washington, seem like a safer bet, they said.
“Now people are saying they want to hold U.S. Treasuries. They don’t care what S&P said,” said Chris G. Christopher Jr., senior principal economist at IHS Global Insight. “They are saying they have nowhere else to put their money.”
In June, China increased its holdings 0.5 percent to $1.166 trillion.
Japan trimmed its holdings 0.2 percent to $911 billion. Britain, the third-largest foreign holder of Treasury securities, boosted its investment 0.8 percent to $349.5 billion.
By Brahma Chellaney
Beijing's creeping aggression signals a challenge to U.S. presence in the Asian Pacific
- Chinese man fed up with his girlfriend's shopping jumps to his death
- CURL: Obama tells a whopper on IRS scandal
- Satanists petition for statue at Oklahoma Statehouse
- Tech companies call for an end to NSA online snooping
- Lawmakers see 'false narrative' of Obama as a terrorist fighter
- Ted Cruz sees legal landmines ahead for Obamacare
- WOLF: The president's other Obamacare lies
- Obama lied about Syrian chemical attack, 'cherry-picked' intelligence: report
- MSNBC host: Obamacare a 'wealthy white men' racist word
- Mike Shanahan says he'd like to return to Redskins
Independent voices from the The Washington Times Communities
The world impacts us. What happens in our towns, cities, states, country and on this planet makes a difference to us.
Happiness is attainable. Morning to night. I love to teach, deal with folks that have an issue and really wish to tackle it and write.
Brazen, leading-edge, “call it like it is” columns and reporting from Ohio native, radio host and writer, Sara Marie Brenner.
White House pets gone wild!
Let it snow