July 19, 2012 / 9:31 PM / in 6 years

Foreign central banks scooped up U.S. Treasuries

NEW YORK (Reuters) - Foreign central banks raised their stakes in U.S. Treasury debt, suggesting they were keen bidders at last week’s auctions in which the government sold $66 billion worth of longer-dated securities, data from the U.S. Federal Reserve released on Thursday showed.

The breakdown of custody holdings showed overseas central banks’ holdings of Treasury debt rose by $11.89 billion to stand at $2.823 trillion in the week ended July 18.

It was the biggest weekly increase since a $22.41 billion jump in the week ended June 20. That coincided with last month’s auctions of the same amount of Treasuries supply in three-year, 10-year and 30-year maturities.

Data on last week’s auctions showed above-average Treasuries purchases from indirect bidders, which include foreign central banks.

Overseas central banks, particularly those in Asia, have been huge buyers of U.S. debt in recent years and own more than a quarter of marketable Treasuries. China and Japan are the biggest two foreign holders of Treasuries.

Moreover, the $21 billion reopening of a 10-year note issue fetched record purchases from direct bidders. This has raised talk among traders that either large investment funds or foreign central banks bypassed U.S. primary dealers to lock in their share of the new supply.

Demand for Treasuries, German Bunds and other perceived safe-haven government debt has been intense. Treasury yields tested their historic lows this week, while Berlin sold two-year debt at negative yields for the first time ever.

On Thursday, the 10-year Treasury yield ended up nearly 2 basis points at 1.51 percent, not far from the recent historic low of 1.44 percent, which is the lowest level going back to the early 1800s, according to data compiled by Reuters.

The Fed offered no details on the increase in Treasuries holdings among foreign central banks. There was no breakdown on how much of the rise came from last week’s supply or the open market.

Foreign central banks’ overall holdings of U.S. marketable securities at the U.S. central bank rose in the latest week, the Fed data showed. The Fed’s holdings of U.S. securities kept for overseas central banks rose $6.37 billion in the week ended July 18, to stand at $3.515 trillion.

Foreign official institutions’ holdings of securities issued or guaranteed by the biggest U.S. mortgage financing agencies, including Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, fell by $5.52 billion to stand at $693 billion.

The full Fed report can be found on: here

Reporting By Richard Leong and Steven C. Johnson; Editing by Chizu Nomiyama and Leslie Adler

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