Alarm bells ring as demands for US Treasuries nosedive
Wed, 17 Feb 2010 08:05:49 GMT


Alarm bells ring in the US over the reluctance of foreigners in buying Treasury securities after a report showed a declining demand for long-term assets in December.

The Treasury Department says China and Japan have decreased their holdings in the treasury fund.

Beijing reduced its holdings by $34.2 billion to $755 billion entitling it to the second-largest foreign holder of US Treasuries behind Japan.

The big drop in China's holdings in December is the largest monthly drop since the year 2000, it said.

Japan also reduced its holdings to $768.8 billion by trimming $11.5 billion of it in December, but it still remains the largest holder of US Treasury securities.

"Foreign holdings of US Treasury securities fell by 53 billion dollars in December, surpassing the previous record drop of 44.5 billion dollars in April 2009," the report said.

The US budget deficit is projected to hit a record high of $1.56 trillion in 2010, surpassing last year's record $1.4 trillion deficit.

Critics say the gigantic gap will not be sustainable and will eventually damage the economy.

They also warned that the decline in holdings of Treasury securities may force the US government to make higher interest payments in the future.

DB/MB/DT

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