Data shows foreign holdings of U.S. Treasury bonds hit their all-time high in August

NEW YORK (Reuters) – Foreign holdings of U.S. Treasury bonds rose to a record high in August, Treasury Department data showed on Thursday, rising for four consecutive months.

U.S. Treasury securities held by foreigners rose to $8.503 trillion in August, compared to $8.338 trillion in the previous month. Compared to the previous year, they rose by 11.5%.

The benchmark 10-year Treasury yield began August at 3.978% and ended the month at 3.844%, down 13.4 basis points. U.S. Treasury yields fell in August as Federal Reserve officials announced the start of the easing cycle and inflation was on track to reach its 2% target.

On September 18th, the Fed finally cut interest rates by a whopping 50 basis points.

The data also showed that Japan remained the largest non-U.S. holder of government bonds with a holding of $1.129 trillion, the largest since March. Its holdings have increased for three months in a row.

China’s Treasury bonds fell for the second straight month in August to $774.6 billion. In March they fell to as much as $767.4 billion, the lowest since January 2010, when the country’s holdings fell to $765.2 billion.

Government bond holdings in the world’s second-largest economy reached a record high of $1.315 trillion in June 2011.

Major U.S. asset classes also saw inflows during the month, according to the data.

On a transaction basis, U.S. Treasury securities saw foreign inflows of $19.2 billion, compared to $55.9 billion in July.

Foreign purchases by U.S. companies and agencies continued in March, with inflows of $41.7 billion and $4.2 billion, respectively.

U.S. stocks also saw massive buying worth $64.8 billion in August, up from $43.7 billion the previous month, data showed.

Overall, net purchases of long- and short-term securities abroad, including bank flows, recorded a net inflow of $79.2 billion in August, a significant decrease from $159.1 billion in the previous month.

U.S. residents, meanwhile, increased their holdings of long-term foreign securities, net buying $18.4 billion this month. In July they sold $400 million worth of foreign securities.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chris Reese and Marguerita Choy)