July 16, 2019 / 8:58 PM / 5 months ago

UPDATE 1-Japan's holdings of U.S. Treasuries surge to near two-year peak -Treasury data

* Japan posts biggest rise in U.S. bond holdings in six years

* China’s U.S. Treasuries holdings lowest in nearly two years

* Treasuries held in UK hit eight-year peak. (Adds background, graphic)

By Richard Leong

NEW YORK, July 16 (Reuters) - Japan increased its holdings of U.S. Treasuries to its highest level in nearly two years in May, while China trimmed its ownership of U.S. bonds to a two-year low, data from the U.S. Treasury Department released on Tuesday showed.

The two countries remained by far the two largest foreign holders of Treasuries.

Overall foreigners sold $33.84 billion in longer-dated Treasuries, which exclude bills, compared with net purchases worth $16.95 billion in April.

Japan’s holdings of U.S. government debt jumped to $1.101 trillion in May, a level not seen since August 2017 and up from $1.064 trillion in April.

The increase in Japan’s holdings was also the biggest since July 2013.

China’s stake in Treasuries declined for a third consecutive month to $1.110 trillion, the lowest since May 2017 and down from $1.113 trillion the month before.

China’s Treasuries holdings have been in focus amid speculation whether Beijing may retaliate against U.S. President Donald Trump’s threat of increasing tariffs on Chinese goods.

“The decline this month, as well as the modest declines of the past two months, are under heavy scrutiny because of the ongoing trade tensions, but we do not think that these declines are a worrying sign at this point,” Jefferies LLC senior money market economist Tom Simons wrote in a research note.

Among other major countries, Treasuries held in the United Kingdom climbed to $323.1 billion in May, an eight-year high.

Meanwhile, overseas accounts on balance sold $14.6 billion in long-term U.S. securities, compared with a net purchase of $40.8 billion in April.

Foreigners also pared their holdings of U.S. stocks by $1.45 billion in May, which was modest compared with the brisker pace of sales earlier this year.

On the other hand, they bought $15.11 billion in longer-term agency securities, bringing their year-to-date total purchase to $90.53 billion.

Overseas accounts favored U.S. corporate bonds once again, buying $14.49 billion worth of them in May which was the most since last August.

Reporting by Richard Leong; editing by Jonathan Oatis and Susan Thomas

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