MUMBAI: Given the high yields that the US government debt has been offering since the interest rates there peaked to a multi-decadal high, the Reserve Bank has been ramping up its investments in the world’s most sought-after public debt instrument.
India’s investment in these instruments touched a high of $241.9 billion in June, the third straight month of rising exposure, making it the 12th largest entity owning American treasuries. In June 2023, the exposure was worth $235.4 billion.
With the global financial crisis of 2007-08, which began in the US and pulled the global economy down into a long deep recession for nearly three years, the US Federal Reserve had slashed interest rates or Federal fund rates to zero to negative zone, and the gradually rose to nearly 2.5% till the pandemic-induced inflation spike that had crossed 9%, the highest since the 1980s oil crisis. This forced the Fed to jack up rates and is now hovering around 5-5.25% — again a multi-decadal high, leading to a massive spike in treasury yields.
This high treasury yields was the main reason for the RBI to earn its life-time high profit last fiscal, leading to a windfall gain for the government as the central bank transferred as much as `2.11 trillion in surplus transfers to the government in May this year.
Japan is the top holder worth over $1.11 trillion, followed by China at the second spot with at $780.2 billion in June (before Donald Trump came to power, the China used to hold close to $4 trillion worth of US treasuries), as per the latest data from the US treasury department.
At the third place is England with an exposure of $741.5 billion, and the Luxembourg comes at the fourth slot with $384.2 billion.
At the 11th position is Taiwan with an exposure of $265.9 billion, followed by India at the 12th spot owning US government securities worth $241.9 billion, higher than $237.8 billion recorded in May.
As per the data, India’s holding is the highest in the last one year, and it was at $237.8 billion in May 2024. In April this year, it went down to $233.5 billion declining from $240.6 billion in March. Among the other largest 10 holders of the US public debt are Canada at the fifth spot with $374.8 billion, the Cayman Islands ($319.4 billion), Belgium ($318 billion), Ireland ($308 billion), France ($307.2 billion) and Switzerland ($287.1 billion).