China boosted its holdings of U.S. Treasury debt for the first time in six months. That development could ease concerns that lagging foreign demand will force the U.S. government to pay higher interest rates to finance its debt.
The Treasury Department reported Monday that China's holdings of U.S. Treasury securities rose in March 2 percent to $895.2 billion, the first increase since last September.
Total foreign holdings of Treasury securities rose 3.5 percent to $3.88 trillion.
The government reported that net holdings of long-term securities, which includes the debt of U.S. companies as well as government debt, rose $140.5 billion in March, the largest one-month gain on record. It surpassed the old record of a net increase of $135.8 billion in May 2007.
The big increase was influenced by two factors: a flight to safety by investors increasingly worried about the debt crisis in Europe; and a rebounding U.S. economy which has sparked greater interest by foreigners in purchasing U.S. corporate debt.
Investors have grown nervous about the ability of Greece and other heavily indebted nations to repay their debt. Last week, European nations and the International Monetary Fund assembled a nearly $1 trillion support package to convince investors that their bond holdings are safe. But markets have remained nervous.
Net purchases of long-term U.S. debt had increased $47.1 billion in February after an increase of $15 billion in January.
Those gains were seen as a good sign that foreigners continue to be interested in U.S. debt securities even in a period when Treasury debt has soared.
China is the largest foreign holder of U.S. Treasury securities. The $17.7 billion increase in March left its holdings at the highest level since November.
Japan, the No. 2 foreign holder of Treasury securities, also increased its holdings in March. It raised them 2.1 percent to $784.9 billion.