Does China Own the USA?

Estimated ownership of US Treasury securities ...
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China, the biggest buyer of U.S. Treasury debt, increased its holdings in May for the second straight month, after five months of declines.

Total foreign holdings of Treasury securities also rose, as Japan and the United Kingdom, the second and third-largest overseas owners of Treasury’s, boosted their stockpiles.

China’s U.S. debt holdings increased US$7.3 billion to US$1.16 trillion, the Treasury Department said Monday. Total foreign holdings rose 0.6 percent to US$4.51 trillion.

The report shows that foreign investors didn’t lose their appetite for U.S. government debt in May, even though the U.S. reached its US$14.3 trillion borrowing limit that month. With European governments mired in that continent’s debt crisis, U.S. Treasury securities are benefiting from being seen as a less-risky alternative.

“U.S. Treasuries are still looked upon as being the safest assets in the world,” Jay Bryson, an economist at Wells Fargo Securities, wrote in note to clients. “Investors do not seem to be the least bit worried about a U.S. default as yields continue to move lower.”

The U.S. government sold five-year Treasury notes at a record low yield Wednesday. Yields on longer-dated Treasury’s rose sharply after a large increase in orders for durable goods last month.

// The five-year notes were priced to yield 1.029 percent, about the same as those bought on the open market. The results show that demand remains strong for short-term government debt. Bond yields rise as their prices fall.

Stronger economic news pushed yields of longer-dated notes and bonds higher and their prices lower. A 4-percent increase in orders for long-lasting manufactured goods decreased demand for longer-dated Treasury’s, which are more sensitive to inflation. Stock prices rose for most of the day, decreasing demand for relatively low-risk investments. The Dow Jones industrial average closed up 144 points at 11,321.

The yield on the 10-year note rose to 2.29 percent in afternoon trading, from 2.15 percent late Tuesday. The price fell US$1.22 for every US$100 invested.

The yield on the 30-year bond rose to 3.65 percent from 3.49 percent. The price fell US$3 for every US$100 invested.

The yield on the 2-year note rose to 0.23 percent from 0.21 percent.

Wednesday’s US$35 billion auction was the second of three scheduled for this week. On Tuesday, the government sold US$35 billion of two-year notes, also at record-low yields. It plans to sell US$29 billion of seven-year notes Thursday.