Foreign holdings of US Treasuries soar to all-time peak in August, data shows

NEW YORK (Reuters) – Foreign holdings of U.S. Treasuries surged to a record high in August, data from the Treasury Department showed on Thursday, rising for four straight months.

Holdings of U.S. Treasuries by foreigners rose to $8.503 trillion in August, up from $8.338 trillion in the previous month. They were up 11.5% from holdings a year earlier.

The benchmark 10-year Treasury yield started August at 3.978% and ended the month at 3.844%, falling 13.4 basis points. U.S. Treasury yields had been declining in August as Federal Reserve officials flagged the onset of the easing cycle with inflation on its way to its 2% target.

The Fed eventually cut rates by a hefty 50 bps on Sept. 18.

Data further showed that Japan remained the largest non-U.S. holder of Treasuries, with holdings of $1.129 trillion, the largest since March. Its holdings have increased for three consecutive months.

China’s pile of Treasuries, meanwhile, fell for a second straight month in August to $774.6 billion. It dropped to as low as $767.4 billion in March, which was the smallest since January 2010, when the country’s holdings dropped to $765.2 billion.

Treasury holdings by the world’s second largest economy hit a record high of $1.315 trillion in June 2011.

Major U.S. asset classes also had inflows during the month, the data showed.

On a transaction basis, U.S. Treasuries posted foreign inflows of $19.2 billion, compared with $55.9 billion in July.

Foreign buying of U.S. corporates and agencies also persisted in March, with inflows of $41.7 billion and $4.2 billion, respectively.

U.S. equities also saw huge buying of $64.8 billion in August, up from $43.7 billion in the previous month, data showed.

Overall, net foreign acquisitions of long- and short-term securities, including banking flows, showed a net inflow of $79.2 billion in August, down sharply from $159.1 billion in the month before.

U.S. residents, meanwhile, increased their holdings of long-term foreign securities, with net purchases of $18.4 billion for the month. In July, they sold $400 million in foreign securities.