NEW YORK—Foreign demand for U.S. Treasury bills fell by a record amount last December, U.S. government data showed on Wednesday. That month, China sold a record $34.2 billion in U.S. Treasuries, and relinquished its title as the United States’ top debt holder.
The latest data released by the U.S. Department of Treasury underscores the trade tension between United States and China—with both countries accusing the other of unfair trade practices in recent months. The United States has long requested China to strengthen its currency, while China complained about U.S. trade policies and its arms sales to Taiwan.
Now, China takes action. Over the last five months, the communist nation sold more than $45 billion in U.S. Treasuries it holds. That leaves Japan, with $768.8 billion in U.S. Treasury holdings, as the biggest creditor of the U.S. government.
The action is not entirely unexpected, as some U.S. economists have voiced concerns of China funding the nation’s debt, even as the United States grappled with an economic recession and a $1.6 trillion budget deficit.
Treasury data shows that most of the recent ramp-up in Japanese purchases did not come from the Japanese government, but mostly private institutions in Japan.
“As U.S. long-term yields became higher, Japanese banks and financial institutions were willing to buy Treasuries,” Mizuho Securities analyst Masashi Shimominami said in an interview with the Wall Street Journal.
The Bank of Japan, Japan’s central bank, has indicated that it would keep Japanese interest rates low. As a result, many Japanese banks and investment funds have shifted their governmental holdings from Japanese government bonds to U.S. Treasuries as the Federal Reserve is expected to raise interest rates in the near future.
While China dumps its Treasury holdings, other nations have increased their purchases. Japan bought $11.6 billion in Treasury investments. The U.K. bought $25 billion in Treasuries, while Hong Kong also bought nearly $7 billion. Overall net purchases totaled $63 billion in December 2009.
Earlier this month, Moody’s Investors Service warned that the U.S. government might lose its AAA rating if the nation’s deficit does not decrease.
The latest data released by the U.S. Department of Treasury underscores the trade tension between United States and China—with both countries accusing the other of unfair trade practices in recent months. The United States has long requested China to strengthen its currency, while China complained about U.S. trade policies and its arms sales to Taiwan.
Now, China takes action. Over the last five months, the communist nation sold more than $45 billion in U.S. Treasuries it holds. That leaves Japan, with $768.8 billion in U.S. Treasury holdings, as the biggest creditor of the U.S. government.
The action is not entirely unexpected, as some U.S. economists have voiced concerns of China funding the nation’s debt, even as the United States grappled with an economic recession and a $1.6 trillion budget deficit.
Treasury data shows that most of the recent ramp-up in Japanese purchases did not come from the Japanese government, but mostly private institutions in Japan.
“As U.S. long-term yields became higher, Japanese banks and financial institutions were willing to buy Treasuries,” Mizuho Securities analyst Masashi Shimominami said in an interview with the Wall Street Journal.
The Bank of Japan, Japan’s central bank, has indicated that it would keep Japanese interest rates low. As a result, many Japanese banks and investment funds have shifted their governmental holdings from Japanese government bonds to U.S. Treasuries as the Federal Reserve is expected to raise interest rates in the near future.
While China dumps its Treasury holdings, other nations have increased their purchases. Japan bought $11.6 billion in Treasury investments. The U.K. bought $25 billion in Treasuries, while Hong Kong also bought nearly $7 billion. Overall net purchases totaled $63 billion in December 2009.
Earlier this month, Moody’s Investors Service warned that the U.S. government might lose its AAA rating if the nation’s deficit does not decrease.
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