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NEW YORK, Dec 15 (Reuters) - China and Japan, the two largest non-U.S. holders of Treasuries, reduced their holdings in October, data from the U.S. Treasury department showed on Tuesday, continuing a trend of the last few months.
China’s holdings of Treasuries fell to $1.054 trillion, the lowest since January 2017, cutting its load of U.S. government debt for five straight months.
Japan, the world’s largest holder of Treasuries at $1.269 trillion, also pared back its holdings for a third straight month.
The decline in Japan’s and China’s stockpile of Treasuries was offset by a surge in holdings from Belgium and the UK, two countries used as financial centers for some of the biggest sovereign debt holders.
Belgium’s holdings grew by $21 billion to $239.6 billion, while those of the UK rose to $442.8 billion in October, up $13.9 billion from the previous month.
Foreign ownership of Treasuries overall declined for a third straight month in October, to $7.068 trillion in U.S. Treasuries, down $2.6 billion from $7.071 trillion in September.
At the end of October, U.S. benchmark 10-year Treasury yields rose by about 18 basis points to 0.859%, from 0.677% at the beginning of the month.
“There’s a lot of churn during the month,” said Gennadiy Goldberg, senior rates strategist, at TD Securities in New York.
“We saw very large sellers and large buyers, which partly helps explain why rates rose from their lows during the month. There are investors with conflicting views, making positioning in the market after a very big move lower in rates,” he added.
On a transaction basis, U.S. Treasuries showed foreign outflows of $20.07 billion in October, from inflows of $22.53 billion in September. U.S. Treasury selling was the norm though in six of the last eight months.
At the peak of the pandemic, foreign investors’ selling of Treasuries hit a record high of $310.79 billion in March amid serious liquidity problems, prompting the Federal Reserve to step in and stem the bleeding in the world’s largest bond market.
Foreign investors, meanwhile, bought $24.07 billion in U.S. equities in October, compared to inflows of $38.16 billion the previous month. Foreigners have been net buyers of U.S. stocks for six straight months. In May, U.S. stocks drew record foreign buying of $79.7 billion.
U.S. corporate bonds had net outflows of $21.51 billion in October, from $28.72 billion-outflow in September. Foreigners have sold U.S. corporate bonds in four of the last five months. (Reporting by Gertrude Chavez-Dreyfuss Editing by Chris Reese and Nick Zieminski)
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