Israel Has Dumped 46 Percent of Its U.S. Treasury Bills; Russia 95 Percent

Terence P. Jeffrey | September 19, 2011 | 11:57am EDT
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Russian Prime Minister Vladimir Putin (AP Photo/Mikhail Metzel)

( - Foreign ownership of U.S. government debt declined in July for the second straight month, according to Treasury Department data released Friday.

Overall, foreign holdings of U.S. debt dropped from an all-time high of $4.5115 trillion in May to 4.4956 trillion in June and then to $4.478 trillion in July.

In June and July, President Barack Obama and congressional leaders were negotiating legislation to increase the legal limit on the U.S. government’s debt. In August, Obama signed legislation that will permit the Treasury to borrow up to another $2.4 trillion.

Among major foreign creditors of the U.S. government, entities in Russia led the way in divesting from U.S. Treasury securities, with Russian holdings of U.S. debt dropping by $9.6 billion from June to July.

In fact, Russian-based owners of U.S. debt have dropped about 43 percent of their overall U.S. debt holdings over the past year. Those holdings peaked at $176.3 billion in October 2010, according to Treasury Department data, and dropped to $100.2 billion by July.

More dramatically, since March 2009, according to historical Treasury Department data, the Russians have dumped about 95 percent (94.94 percent) of their holdings in Treasury bills, which are short-term U.S. Treasury securities that mature in periods of one-year or less.

Russian ownership of U.S. Treasury bills peaked at $73.15 billion in March 2009 and had declined to $3.7 billion by July.

Israelis have also been decreasing their ownership of U.S. government debt.

Total Israeli holdings of U.S. Treasury securities peaked at $22.0 billion in April 2010. That had dropped to $17.2 billion by this July, a decline of about 22 percent.

Like the Russians, the Israelis have dramatically decreased their ownership of short-term Treasury bills, according to Treasury Department data. Israeli ownership of Treasury bills peaked at $15.638 billion in March 2009 and declined to $8.375 billion in July, a drop of about 46 percent.

Entities in mainland China countered the worldwide trend, and reversed their own previous trend, by increasing their holdings of U.S. government debt in recent months. 

From October 2010 through March 2011, Chinese holdings of U.S. debt had dropped from an all-time peak of 1.1753 trillion to $1.1449 trillion. But in April, May, June and July, overall Chinese holdings of U.S. debt increased, reaching $1.1735 trillion in July--nearly back to their peak of the previous October.

In June and July, the Chinese also started increasing their ownership of short-term U.S. Treasury bills--after having dramatically drawn them down between May 2009 and May of this year.

Chinese ownership of short-term U.S. Treasury bills hit an all-time peak of $210.417 billion in May 2009. It then dropped to a low of $2.978 billion in May 2011—a decline of almost 99 percent over two years. This June, however, the Chinese increased their ownership of Treasury bills to $4.546 billion; and, in July, they increased them again to $10.122 billion.

(The $10.122 billion in U.S. Treasury bills that the Chinese held at the end of July--while an increase from the two previous months--still represented a 95-percent decrease in Chinese T-bill holdings from their peak in 2009.)

The publicly held portion of the U.S. government debt primarily consists of Treasury bonds that mature in 30 years, Treasury notes that mature in 2 to 10 years, and Treasury bills that mature in one year or less.

Even though foreign ownership of U.S. government debt declined in June and July, the $4.478 trillion in U.S. government debt that was still held by foreign interests at the end of July equaled about 46 percent of the U.S. government debt held by the public--which was $9.7558 trillion at the end of July. The Treasury also owed another $4.586 trillion as of the end of July in what it calls "intragovernmental" debt--which is the money the Treasury has borrowed and spent out federal trust funds such as the Social Security trust fund and has replaced with the equivalent of IOUs that the Treasury  can only redeem by taxing or borrowing more money.

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