Foreign holdings of long-term US assets rises

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Foreign demand for long-term U.S. financial assets rose in March as both China and Japan bought more Treasury securities.

The Treasury Department reported Friday that net purchases of stocks, notes and bonds purchases by foreigners rose to $55.8 billion in March, from $22 billion in February.

Both China and Japan, the two largest holders of U.S. Treasury debt, increased their purchases in March. China remained the biggest foreign holder of Treasury securities, a ranking it obtained late last year when it surpassed Japan.

China’s holdings of Treasury securities totaled $767.9 billion, up 3.7 percent from February. Japan’s holdings of Treasuries rose 3.2 percent to $686.7 billion.

The Obama administration this week raised its forecast for this year’s federal deficit to $1.84 trillion, which would push it more than four times above the previous record set last year. The deficit already is approaching $1 trillion for the budget year that began Oct. 1.

The imbalance is being driven higher by a plunge in tax revenues because of the recession and higher government spending for benefit programs such as unemployment payments and food stamps, as well as the billions being spent from the $700 billion financial rescue effort.

With the government’s borrowing needs soaring, there have been some concerns that at some point foreign interest in holding U.S. debt might falter, causing interest rates to rise.

But so far, the surge in the federal government’s borrowing needs is occurring along with rising foreigner demand for Treasuries as global financial turmoil has pushed investors to the safety of U.S. debt holdings.

Copyright 2009 The Associated Press.