WASHINGTON--China remained the largest foreign holder of U.S. Treasurys in July, but Japan continued to threaten taking over the no. 1 position as a net buyer with another month of record holdings, the Treasury Department said Tuesday.
Overall, foreigners were net buyers of long-term U.S. financial assets in July, according to the monthly Treasury International Capital report, known as TIC. Buying of Treasury bonds and notes--seen as a safe haven amid ongoing turmoil in the euro zone--was the strongest it's been since January.
China's holdings rose marginally by $2.6 billion to $1.150 trillion, following net selling of $17 billion in June.
Meanwhile, Japan remained the second-largest holder of Treasurys, lifting its holdings to $1.117 trillion from $1.110 trillion in June. While China's purchases have fallen by around $165 billion in the past 12 months, Japan has boosted its portfolio by roughly $232 billion in the same period. The dollar-buying has come as Japan defends the yen against appreciation that could damage its economy and as China has appreciated its currency. Japan has indicated it may intervene again after the U.S. Federal Reserve's decision earlier this month for further monetary policy easing put pressure on the yen.
Among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $50.0 billion, compared with net buying of $32.4 billion in June. Private foreign investors bought a net in $23.2 billion Treasury notes and bonds, after buying a net of $11.6 billion the previous month.
The closely watched figure of net long-term securities transactions showed total buying of $67.0 billion in long-term U.S. securities in July, after purchases of $9.3 billion the month before.
More broadly, net purchases of long-term U.S. securities, including transactions that don't occur on the open market, totaled $51.1 billion following net selling of $6.0 billion the month before.
The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including non-market transactions such as stock swaps and principal repayment on asset-backed securities.
The report's most comprehensive category, "monthly net TIC flows," includes non-market flows, short-term securities and changes in banks' dollar holdings. This measure of net foreign capital inflow was $73.7 billion, compared with an inflow of $15.1 billion in June. Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit.
The TIC's data can be found on the Treasury's Web site at: http://www.treas.gov/tic. With each monthly
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