January 31, 2019 / 10:22 PM / 16 days ago

China's U.S. Treasury holdings hit lowest since May 2017

NEW YORK (Reuters) - China, the largest non-U.S. holder of Treasuries, slashed its holdings of U.S. government debt for a sixth straight month in November, Treasury Department data released on Thursday showed.

China had $1.121 trillion in U.S. Treasuries in November, down from $1.138 trillion in October. The decline brought China’s Treasury holdings to the lowest level since May 2017, the data showed.

Even so, the world’s second largest economy remains the largest holder of U.S. Treasuries outside the United States.

“It can be for any number of reasons, but China is not doing this for political purposes,” said Lou Brien, market strategist at DRW Trading in Chicago.

The reduction in U.S. Treasury holdings comes as China’s foreign exchange reserves unexpectedly rose in November to $3.062 trillion. That was the first gain since July and compared with a fall of $33.93 billion in October.

At the same time, the Chinese yuan rose 0.2 percent against the dollar in November, the first monthly rise since March. China typically sells U.S. Treasuries to support a weakening local currency.

Even though China’s Treasury holdings declined, DRW’s Brien said China may be holding some of its U.S. debt in other countries such as Belgium.

Data showed that Belgium saw an increase in Treasuries to $173 billion in November, from $169.7 billion the previous month.

Japan, on the other hand, saw its stash of Treasuries increase to $1.036 trillion in November, from $1.018 trillion in the previous month. Prior to the November rise, Japan had been paring Treasury holdings for three straight months.

Overall, foreign holdings of Treasury securities rose marginally to $6.204 trillion, from $6.2 trillion in October.

Data also showed an outflow in U.S. Treasuries for the month of November to the tune of $9.28 billion, following a modest inflow of $1.72 billion in October.

Foreign official institutions including central banks sold $33.29 billion in Treasuries, offsetting purchases of $24.64 billion from private investors.

The report also showed foreigners in November bought net long-term U.S. securities for a fifth straight month, totaling $37.6 billion, from $31.9 billion in October.

Foreigners, however, sold $5.6 billion in U.S. stocks in November, from outflows of $22.16 billion in the previous month. Foreign investors have sold U.S. equities for seven straight months.

Reporting by Gertrude Chavez-Dreyfuss; editing by Leslie Adler

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