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Foreign investments in U.S. debt

WASHINGTON — Many Americans know that China holds the most U.S. Treasury debt, followed by Japan. But who would expect a group of Caribbean countries would collectively come in fifth?

Or that Luxembourg would come in eighth?

A look at which countries hold large amounts of Treasury securities — investments in U.S. 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 sectors.

The fifth-largest holder of Treasurys is a collection of Caribbean countries, including the Bahamas, Bermuda, and the Cayman Islands, with $189.7 billion. The Treasury Department collectively calls the group “Caribbean Banking Centers.”

The Cayman Islands, for example, has become a major financial center. 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 U.S. Treasury securities, with $104.2 billion, just behind Russia at $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 Web site. Its large holdings of Treasurys likely reflect that reality. A call and e-mail 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 U.S. Treasurys and other securities.

Separately, the Treasury report showed that about $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 U.S. government debt.

Here are some other details that can be found in the Treasury International Capital report.

THE TOP 10 LENDERS TO UNCLE SAM

$776.4 billion: The amount of Treasury securities held by China at the end of June

$711.8 billion: The amount held by Japan

$214 billion: The amount by the U.K.

$191 billion: The amount collectively held by Saudi Arabia, Venezuela and 13 other oil exporters

$189.7 billion: Held by the Caribbean banking centers

$139.8 billion: Held by Brazil

$119.9 billion: Held by Russia

$104.2 billion: Held by Luxembourg

$99.8 billion: Held by Hong Kong

$77 billion: Held by Taiwan

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