WASHINGTON (AP) — China, the largest holder of U.S. Treasury debt, slightly increased its holdings in July after two months of declines.

The Treasury Department says China's holdings of Treasury securities edged up to $846.7 billion in July. That's an increase of 0.4 percent, after declines of 2.7 percent in June and 3.6 percent in May.

The debt figures are being closely watched at a time when the U.S. government is running record annual deficits. A drop in foreign demand could lead to higher interest rates in the United States.