Overseas investors quadrupled purchases of US Treasury debt in August, the US Treasury Department said on Tuesday, even as one ratings agency stripped the United States of its AAA credit rating. Most of the net $60.1 billion inflow into the bond market came from private investors seeking shelter from global market turmoil that began with fears that political fight over America's debt limit would lead to a US default.
While the default was averted, Standard & Poor's still cut the country's top credit rating, citing fear that politicians would not agree on ways to reduce the deficit in the long run.
Including short-term instruments such as bills, foreigners bought a net $89.6 billion in August, the most in five months. That reversed a $52.4 billion outflow in July. Overall net foreign purchases of long-dated securities, which also includes US housing agency and corporate debt, rose to $57.9 billion from a revised $9.1 billion in July.
China, the largest foreign US creditor, cut its Treasury holdings by $36.5 billion to $1.137 trillion, while Hong Kong, Taiwan, Russia and Singapore also pared Treasury holdings. Japan, the second largest foreign US creditor, also increased holdings by $21.8 billion to $936.6 billion.
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