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Foreign purchases of U.S. 10-year notes increased in May

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NEW YORK, May 22 (Reuters) - Foreigners increased their purchases of U.S. 10-year Treasury notes in early May in a lacklustre auction that had stoked speculation China was cutting back on buying in retaliation for the threat of sharply higher U.S. tariffs on Chinese goods.

China, which is the largest foreign holder of U.S. government debt, had $1.121 trillion worth of Treasuries at the end of March, Treasury data showed.

The Treasury Department’s auction allotment data do not offer a breakdown of foreign purchases by countries. But data released on Wednesday showed the Treasury allotted $4.483 billion of the 10-year supply to overseas accounts, up from $3.975 billion it awarded in April.

In percentage terms, foreigners bought 16.6% of the $27 billion in 10-year notes offered in May, nearly identical to the percentage of the $24 billion 10-year notes sold the month before, Treasury data showed.

The auction saw the weakest overall bidding in more than 11 years on May 8, the same day the United States said it would raise tariffs on $200 billion worth of Chinese imports to 25% from 10%.

The sale was a part of the Treasury's quarterly refunding, which raised $28.6 billion in new cash for the federal government.

The poor auction touched off a sell-off in the Treasuries market that day. The 10-year note yield rose 3 basis points to 2.480% on the open market.

(Reporting by Richard Leong Editing by Sonya Hepinstall)