US foreign debt hit $5,480b in October
AP, Dec 17 2012
Foreign ownership of US Treasurys rose to a record level of $5,480b in October, the Treasury Dept said Monday. That was up by $6b or 0.1% from September. China, the largest holder of US government debt, increased its holdings slightly to $1,160b. Japan, the second-largest holder, boosted its holdings by a smaller amount to $1,130b. Brazil, the country with the third-largest holdings, increased its total to $255.2b. The slowdown in purchases of Treasurys suggests that investors are more willing to buy other debt, including from European governments. The federal government is expected to hit its borrowing limit of $16,390b by the end of December. Treasury Secretary Timothy Geithner has said he would resort to the same financial maneuvers he used in the last debt standoff in 2011 to keep the government from defaulting on its debt. But these operations will buy only a few weeks’ time, until late February or early March. By then, the government will face the prospect of a first-ever debt default if Congress doesn’t raise the debt ceiling. After the last debt standoff, S&P downgraded the government’s credit rating on long-term securities one notch from the highest level of AAA to AA+. It was the first-ever downgrade of US government debt. Last month, Fitch said Obama will need to quickly reach a budget agreement with Congress over the “fiscal cliff” or risk losing Fitch’s AAA rating. The fiscal cliff refers to the collection of tax increases and spending cuts set to take effect in January unless a deal is reached. Economists have warned that the US economy would be pushed into a recession sometime next year if the fiscal cliff isn’t averted.
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