What Credit Rating Downgrade? Foreign Treasuries Holdings At Record Levels

Total foreign holdings of U.S. Treasury debt (NYSE:TLT) is at a record high of $4.75 trillion, driven by an increase of 1.7% in November, according to a news release Wednesday. Worries regarding the Congressional debt debacle of last year seem now to be dismissed, certainly compared to concerns over the current European debt crisis. That unresolved situation could be causing a shift back to greater holdings of Treasuries, as well.

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Specific changes include the Treasury’s second largest creditor, Japan; in November it increased its holdings 1%, up to $1.04 trillion. Great Britain, the third largest buyer, now holds $429.4 billion, up 6% in the same month. In the meantime, China, the largest foreign holder, has cut Treasuries by 1%, to $1.13 trillion.

November showed the largest monthly gain in Treasury debt since September. The demand for Treasuries abroad is an indirect endorsement of the future performance of the U.S. economy. The ability of the Treasury to repay the debt rests in part upon tax revenues, and those revenues are greatly enhanced by a strong economic recovery.

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To contact the reporter on this story: Mark Lawson at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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