Foreign Ownership of US Treasuries Surpasses $9 Trillion in March

NEW YORK: Data from the Treasury Department revealed on Friday that foreign ownership of U.S. Treasuries reached an all-time high in March, increasing for the third consecutive month, as the demand for U.S. government debt stayed strong a few months following President Donald Trump's inauguration. U.S. Treasury holdings jumped to $9.05 trillion in March, reaching a record high and increasing over $233 billion from February's $8.81 trillion.  In comparison to a year prior, Treasuries held by foreign entities increased by almost 12 per cent. 

Certain analysts indicated that this trend might alter in April when the Trump administration launched a significant trade shock on April 2nd, causing effective tariff rates to rise sharply, especially on Chinese products. This triggered a sell-off in U.S. Treasuries that, at one stage, drove benchmark 10-year yields up by over 70 basis points (bps) to almost 4.6 per cent during the period from April 3 to 11. Analysts suggested that the selloff might have involved sales by foreign investors. Trump has since suspended the implementation of tariffs for 90 days, and the Treasuries market has somewhat stabilised, though foreign investors are likely to still be cautious about U.S. assets.

Data indicated that UK investors surpassed China to become the second-largest non-U.S. holders of Treasuries, possessing $779 billion in holdings. The UK is commonly seen as a custodial account, often serving as a surrogate for hedge funds. Additional nations utilised by hedge funds for custody services are the Cayman Islands and the Bahamas.

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Japan continues to be the largest holder of Treasury debt, possessing $1.13 trillion in March, an increase of roughly 0.4 per cent from the $1.126 trillion held in February. For a second consecutive month, Japan's holdings of Treasuries increased. 

China, conversely, cut its holdings of Treasuries to $765.4 billion in March, a decrease from $784.3 billion in the prior month. In December of the previous year, China's holdings reached $759 billion, marking the lowest level since February 2009 when the nation's Treasury stock fell to $744.2 billion. Analysts noted that Chinese investors' Treasury holdings have declined since 2018. The key 10-year Treasury yield began March at 4.18 per cent and concluded the month a bit higher at 4.425 per cent. The data indicated that significant U.S. asset classes experienced a combination of inflows and outflows throughout the month.

On a transactional basis, investments in Treasury bonds and notes experienced a net inflow of $123 billion in March, after inflows of $106.2 billion in February. Data revealed that foreign investors kept purchasing U.S. corporate bonds, registering inflows of $60.4 billion, while agencies experienced outflows of $10.4 billion. U.S. stocks, on the other hand, saw inflows of $10.4 billion in March, a decrease from $24.7 billion in the month before. In March, total foreign purchases of long- and short-term securities, along with banking transactions, experienced a net outflow of $254.3 billion, a slight increase from the $248.9 billion recorded in February.