September 16, 2015 / 9:15 PM / 4 years ago

UPDATE 1-Foreigners sell Treasuries in July; China's U.S. debt holdings fall

(Adds breakdown of inflows and outflows, details on China’s Treasury holdings)

NEW YORK, Sept 16 (Reuters) - Foreigners sold U.S. Treasuries in July, data from the U.S. Treasury Department showed on Wednesday, as major central banks unloaded U.S. government debt for a 10th straight month.

Foreign outflows from the U.S. Treasury market totaled $28.7 billion in July, after inflows of $69.8 billion in June. The U.S. Treasury outflow was the first in five months, data showed.

Foreign official institutions, which include global central banks, accounted for 70 percent of the outflows in U.S. Treasuries, as they sold $20.3 billion in July.

China’s holdings of U.S. Treasuries declined during the month to $1.240 trillion, the smallest since February 2015. In June, China had $1.271 trillion in U.S. Treasuries. China is still the largest holder of U.S. Treasuries, with holdings peaking at $1.317 trillion in November 2013.

The fall in Chinese holdings of U.S. Treasuries, the largest since December 2013, was consistent with ongoing speculation that the world’s second largest economy has been selling U.S. Treasuries bonds in an effort to prop up its deflating currency and stem capital outflows triggered by the country’s slowdown and declining stock market.

China and emerging markets had led the build up in global FX reserves, the bulk of which are in U.S. Treasuries, following the 1997 Asian crisis to a peak of $12 trillion last year. This cash pile shielded them from the 2007-08 crisis.

Japan had the second-largest holdings of U.S. Treasuries, with $1.197 trillion in July, little changed from June.

Data also showed that foreign buying of long-term U.S. securities, including government and corporate debt, dropped significantly in July.

Foreigners bought long-term U.S. assets totaling just $7.7 billion in July, down from $103.1 billion in June. Including short-dated assets such as bills, however, overseas investors bought $141.9 billion in July, after selling a net $129.7 billion the previous month.

U.S. equities, meanwhile, showed an inflow of $3.6 billion in July from an outflow of $22 billion the previous month. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve Orlofsky and Andrew Hay)

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