US foreign investment balance shrunk in June

US Treasury Department in Washington
© AFP/File Mladen Antonov

WASHINGTON (AFP) – The US balance on incoming long-term foreign investment shrunk in June as the political showdown over the country’s debt ceiling intensified, Treasury Department data showed Monday.

There was a surge in outgoing investment into foreign long-term securities, while incoming investment slowed, leaving just a $3.7 billion positive balance, the lowest level in recent months.

Foreign investors, both governments and private investors, pared their investments into US securities — mainly Treasury bonds and notes — during the month: from a climb of an average of $13.0 billion a month during the previous three months, foreign investment contracted by $8.0 billion in June.

That took place as a battle mounted over whether the US debt ceiling would be increased before the country would be forced to default on its commitments, which was expected to happen on August 2.

While the Treasury had curtailed some debt sales because of the ceiling, it was not clear whether the downturn in investment also stemmed from fears about the issue.

Ultimately the ceiling was raised in a last-minute deal completed on August 2.

Meanwhile Chinese holdings of US debt — Beijing is the country’s largest creditor — increased to $1.166 trillion from $1.160 trillion the previous month, while Japanese holdings eased to $911 billion from $912 billion.