Foreigners dumped treasuries as debt fight raged

Foreigners dumped U.S. treasury bonds in June as the debt-ceiling fight heated up in Washington, according to a Monday report by the Treasury Department.

Private foreign investors sold a record $18.5 billion in Treasury bonds and notes in June, the highest monthly total ever. The previous record was $16.5 billion in June 2000. Private foreign investors had bought $16.4 billion in bonds and notes in May.

Foreign government institutions mitigated the hit to U.S. bonds somewhat, buying $13.8 billion in June. That was down from $21.5 billion in purchases in May, however.

China remains the top holder of U.S. securities, with $1.166 trillion in holdings in June, a $6 billion increase from $1.160 trillion in May. Japan remains the second leading holder of U.S. bonds, at $911 billion, after sales of $1.4 billion in June.

The United Kingdom is the third highest creditor, with $349 billion in holdings, an increase of nearly $3 billion from May. 

The June sales and purchases came before Standard & Poor’s downgraded the U.S. credit rating on Aug. 5 from AAA to AA+.

S&P made the move because while the debt-ceiling fight did not result in a default on U.S. bond obligations, the final deal did not do enough to stabilize U.S. finances in the long term.