Foreign Holdings of US Debt Dip Amid Treasury Market Turbulence

The United Kingdom was the second-largest holder of U.S. debt for the second straight month.

Published: 6/19/2025, 3:29:51 PM EDT

Foreign Holdings of US Debt Dip Amid Treasury Market Turbulence — U.S. dollar bills and coins in Washington on Oct. 4, 2024. (Madalina Vasiliu/The Epoch Times)

Global holdings of U.S. debt declined slightly in April from their all-time high, according to new data from the Treasury International Capital report.

Foreign investors trimmed their exposure to Treasury securities by more than $36 billion to $9.013 trillion, down from the record $9.049 trillion in March.

Japan remained the top holder, adding $4 billion to its portfolio of $1.134 trillion in U.S. assets. The United Kingdom was the second-largest holder of U.S. government bonds, rising to $807.7 billion from $779.3 billion in the previous month.

China reduced its stockpiles for the second consecutive month, falling to $757.2 billion from $765.4 billion. Beijing has been on a years-long campaign to divest from U.S. Treasury bonds. Compared to a decade ago, Chinese holdings are down by approximately $800 billion.

Canada led the selloff, reducing its holdings by nearly $60 billion to a total of $368.4 billion. Singapore and Hong Kong followed the Great White North, each selling off $15 billion, while Norway and South Korea trimmed $5 billion and $4 billion, respectively.

Conversely, nations that added to their investments in U.S. debt included Ireland ($10 billion), the United Arab Emirates ($8.5 billion), and Brazil ($4 billion).

In recent years, foreign investors have been ultra bullish on assets in the world’s largest economy.

According to data compiled by Torsten Slok, Apollo’s chief economist, foreigners own 30 percent of Treasurys and 20 percent of U.S. equities. However, Slok suggested in separate research that foreign investors are growing tired of American assets, pointing to the results of a 30-year auction last month.

“Looking at foreign participation in 30-year Treasury auctions shows a downward trend in recent months,” Slok said in a note emailed to The Epoch Times.

At the June 12 $22 billion 30-year auction, meanwhile, foreign bidders purchased approximately 66 percent of the available supply, which is below the 12-month average of around 73 percent.

Still, the Treasury International Capital figures confirm that international investors did not flee the U.S. Treasury market as many analysts had feared following President Donald Trump’s April 2 announcement of sweeping global tariffs.

Shot Down in April, Flying High in May

Shortly after sliding below 4 percent two days after the president's Make America Wealthy Again event, the yield on the benchmark 10-year Treasury spiked to nearly 4.5 percent.

Rising Treasury yields and falling prices signal waning demand.

At the time, Minneapolis Federal Reserve President Neel Kashkari stated that this was a signal that the world was engaged in diversifying away from the United States.

“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said in an interview with CNBC's "Squawk Box."

The U.S. economy's attractiveness would inevitably result in a trade deficit, Kashkari said.

"If the trade deficit is going to go down, it could be that investors are saying, 'OK, America no longer is the most attractive place in the world to invest,' and then you would expect to see bond yields go up," he said.

President Donald Trump holds a chart next to Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington on April 2, 2025. (Reuters/Carlos Barria/File Photo) — President Donald Trump holds a chart next to Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington on April 2, 2025. Reuters/Carlos Barria/File Photo

Federal Reserve Chair Jerome Powell was slow to reach a similar conclusion.

In April, Powell stated in a public appearance that markets are functioning well despite the turmoil engulfing Wall Street, adding that it is premature to say exactly what is happening.

"What I think is going on in markets is markets are processing what's going on, markets are struggling with a lot of uncertainty, and that means volatility," he said at an event hosted by the Economic Club of Chicago.

Vaibhav Tandon, chief international economist at Northern Trust, wrote last month that if Japan and China were selling their holdings at a rapid pace, "markets would have probably endured far greater turmoil."

"Dumping Treasuries would have hurt the two Asian economies as much as it would hurt the United States: they would be selling bonds at a loss and driving down the value of their foreign reserves," he said in a May 2 note.

Treasury securities continue to be safe-haven assets, and near-term foreign divestment appears to be limited, according to strategists at State Street Global Advisors.

“The tariff-driven sudden selloff appears technical, though amplified by fiscal worries, inflation pressures, and political uncertainties,” they said in a June 5 note. "These factors contributed to a higher term premium."

Even if there is a foreign investment initiative to dump U.S. government bonds, it would be a gradual and multi-process, they added.

The United States is not entirely out of the woods. New York Federal Reserve data show that central banks have withdrawn nearly $50 billion of U.S. bonds and other assets since the end of March to a five-month low.

Despite the spikes gripping the 10-year yield, it remains roughly the same as it was a year ago: 4.39 percent.

From The Epoch Times