Foreign investments in US debt - Caribbean No. 5 creditor
Published: Wednesday | August 19, 2009
Many Americans know that China holds the most United States (US) Trea-sury debt, followed by Japan. But who would expect a group of Caribbean countries to collectively come in fifth?
Or that Luxembourg would come in eighth?
A look at which countries hold large amounts of Treasury securities - investments in US debt - provides an interesting glimpse into the world economy. Some governments - like China - have amassed large holdings in an effort to keep their currencies from becoming too valuable against the dollar, which keeps their exports to the United States cheaper.
Others have large holdings because of their financial centres.
The fifth-largest holder of Treasurys is a collection of Caribbean countries, including The Bahamas, Bermuda, and the Cayman Islands, with US$189.7 billion. The Treasury Department collectively calls the group 'Caribbean Banking Centres'.
The Cayman Islands, for example, has become a major financial centre. It is home to 9,000 hedge funds and other investment vehicles, according to a report last year by the Government Accountability Office. Those funds likely hold some Treasury securities.
Many investment funds use the Cayman Islands as an offshore tax haven, according to the GAO report.
Luxembourg, meanwhile, is the eighth-largest holder of US Treasury securities, with $104.2 billion, just behind Russia at US$119.2 billion.
The small country of 460,000 has a healthy banking sector whose companies are among Europe's leading asset managers, according to the Luxembourg embassy's Website. Its large holdings of Treasurys likely reflect that reality. A call and email to the Luxembourg embassy seeking comment weren't returned.
The data on Treasury holdings was released Monday as part of a monthly report from the Treasury Department on foreign holdings of US Treasurys and other securities.
Separately, the Treasury report showed that about US$31.2 billion in capital flowed out of the United States in June, about half the level of outflows in May. But economists said much of that was due to sales of short-term investments such as Treasury bills, and didn't reflect an overall loss of confidence in US government debt.
Here are some other details that can be found in the Treasury International Capital report.
TOP 10 LENDERS TO
US$776.4 billion: The amount of Treasury securities held by China at the end of June
US$711.8 billion: The amount held by Japan
US$214 billion: The amount by the UK
US$191 billion: The amount collectively held by Saudi Arabia, Venezuela and 13 other oil exporters
US$189.7 billion: Held by the Caribbean banking centres
US$139.8 billion: Held by Brazil
US$119.9 billion: Held by Russia
US$104.2 billion: Held by Luxembourg
US$99.8 billion: Held by Hong Kong
US$77 billion: Held by Taiwan
STILL BUYING TREASURIES
US$78 billion: Net Treasury debt bought by private foreign investors in June
US$22.5 billion: Net amount bought by foreign governments
US$16.9 billion: Net purchases of US equities by private foreign investors in June
US$2.2 billion: Net purchases by foreign governments
FANNIE AND FREDDIE
NOT SO POPULAR
US$5.9 billion: Fannie Mae and other housing agency debt unloaded by foreign governments in June
US$103.1 billion: Amount sold in 12 months ending in June
COVERING US BILLS
US$82.8 billion: Net purchases of long-term U.S. securities in April-to-June quarter
US$81.8 billion: Trade deficit for April-June quarter - the amount by which the value of US imports exceeded the value of US exports.