Foreign holdings of US debt hit record high of $5.26 trillion

The Treasury Department says total foreign holdings rose 1 percent to $5.26 trillion. It was the fifth straight monthly increase.

Demand for US debt is rising largely because investors are worried about Europe's worsening debt crisis and its impact on the global economy. US government debt is considered one of the safest investments.

The report suggests that foreign investors and governments, which are big buyers of US debt, aren't worried about large US budget deficits. Nor do they appear concerned about last year's downgrading of US long-term credit by rating agency Standard & Poor's. China increased its holdings 0.4 percent in May to $1.17 trillion. That followed a 1.8 percent rise in April and 1 percent drop in March.

In the meantime, Federal Reserve Chairman Ben Bernanke on Tuesday offered a gloomy view of the economy's prospects, but provided few concrete clues on whether the US central bank was moving closer to a fresh round of monetary stimulus. Bernanke told the Senate Banking Committee the economic recovery was being held back by anxiety over Europe's debt crisis and the path of US fiscal policy, and he expressed unease over a stagnant jobs market. The Fed chairman told lawmakers the central bank was considering a range of tools it could employ to help the economy but he hewed closely to the message of watchful waiting that the central bank's policy panel delivered in June.