Overseas demand for long-term US securities faded in February, US Treasury data showed on Friday, and some large foreign US creditors trimmed holdings of US government bonds for a fourth straight month. The data highlights market worries about US finances. In recent months, concern in some quarters about long-term US credit-worthiness have helped push up government borrowing costs.
In light of fiscal concerns, The Obama administration this week pledged to shave $4 trillion from the US budget deficit over 12 years. Twin US budget and trade deficits mean the country must rely on foreigners for financing, and Treasury data suggested overseas appetite for US assets waned in February.
Net buys of long-term US assets, excluding bills, fell to $26.9 billion, compared to $51.1 billion in January. Foreigners bought $15.8 billion fewer Treasuries in February, the fourth straight monthly reduction, and also trimmed equity and corporate debt purchases.
The drop in long-term assets partly reflects less buying by foreign central banks, analysts said. Russia, for instance, trimmed Treasury holdings for a fourth straight month to $130.5 billion. China, the top foreign US creditor, cut its huge stash by about $1 billion to $1.154 trillion, also a fourth straight monthly reduction.
Export-led emerging market countries amass huge dollar reserves and in recent years have recycled much of them into in US Treasuries. China this week reported its foreign exchange reserves hit a record above $3 trillion. China still holds more than $1 trillion in Treasuries and probably could not start selling them aggressively without hurting the value of its own portfolio. Japan, the second largest US foreign creditor, increased Treasury holdings by $4.4 billion to $890.3 billion. In recent months, private foreign investors have also made up for the decline in official purchases.