Foreign holdings of US Treasury securities hit a record high
The US Treasury Department announced that foreign holdings of US Treasury securities rose to $9.355 trillion in November, their highest level ever. This increase followed two consecutive months of declines and reflects improved market sentiment after the end of the longest federal government shutdown in history.
Japan remained the largest holder of US Treasury securities, with holdings of $1.202 trillion in November. This increase has continued for 11 months and reflects Japan's confidence in the US economy. The UK increased its holdings to $888.5 billion, and Canada's holdings rose by 13% to $472.2 billion.
In contrast, China reduced its holdings to $682.6 billion, its lowest level since September 2008. China is seeking to reduce its reliance on US Treasury bonds and increase its reliance on gold and other currencies. This move reflects China's strategy to lessen its dependence on the US dollar and strengthen its local currency.
The US Treasury sold $22 billion in 30-year bonds, with oversubscription. The yield on the 30-year bonds reached 4.82%. The Treasury also sold $39 billion in 10-year bonds, with a yield of 4.17%.
This increase in foreign holdings reflects foreign investors' confidence in the US economy and reinforces the US dollar's position as the world's reserve currency. It also reflects the success of the US Treasury in attracting foreign investors to finance the US budget deficit.
Foreign holdings are expected to continue rising in the coming months, especially if the US economy continues to grow and inflation remains low. However, there are potential risks, such as global trade tensions and monetary policy changes, that could affect demand for US Treasury bonds.
