Record-Breaking Surge in Foreign Demand for US Treasuries
Foreign ownership of US Treasuries surged to a new all-time high in March, breaching the $9 trillion mark amid sustained global appetite for American debt securities. According to data released by the US Treasury Department, foreign holdings of US Treasuries rose to $9.05 trillion, up by over $233 billion from February’s $8.81 trillion. This marked the third consecutive monthly increase and represented a nearly 12% jump compared to the same period last year. The record-level accumulation reflects continued confidence in US sovereign debt shortly after President Donald Trump assumed office, although upcoming data may reveal a shift in sentiment following policy developments in early April.
Highlights:
Foreign holdings of US Treasuries hit $9.05 trillion in March, an all-time high.
Monthly increase of $233 billion and annual rise of nearly 12%.
March marked the third straight month of increasing foreign demand for Treasuries.
Strengthened confidence in US government debt in early months of the Trump administration.
Tariff Shock Raises Questions About April Outlook
Despite March’s record-setting figures, analysts caution that the dynamics may have shifted in April following a significant policy shock on April 2, when the Trump administration implemented steep tariffs, primarily targeting Chinese imports. The move led to a sharp sell-off in US Treasuries, with the yield on the benchmark 10-year note climbing over 70 basis points in just over a week, peaking near 4.6% by April 11. Analysts suggest some of that pressure may have been driven by foreign liquidations, indicating that April’s data could reflect a reversal in demand as geopolitical and trade concerns escalated. While the subsequent 90-day pause on new tariffs has helped stabilize the bond market, foreign investors may continue to approach US assets with caution.
Highlights:
April 2 tariff shock triggered a steep rise in 10-year yields, up 70 bps to nearly 4.6%.
Potential foreign investor sell-off in early April not reflected in March data.
Treasury market has since stabilized following a 90-day tariff pause.
Analysts expect a more cautious foreign stance in the months ahead.
Shifting Foreign Holders: UK Surpasses China, Japan Stays on Top
Japan retained its status as the largest foreign holder of US Treasury securities, with $1.13 trillion in holdings at the end of March, up modestly from $1.126 trillion in February. Japan’s holdings have now increased for two consecutive months. Meanwhile, the United Kingdom overtook China as the second-largest non-US holder, with $779 billion in Treasuries. However, this figure is widely understood to include custodial accounts, often serving as proxies for hedge funds and other non-transparent institutional investors. Countries such as the Cayman Islands and the Bahamas similarly serve as hubs for hedge fund activity and Treasury custody.
China’s Treasury holdings fell for the second consecutive month to $765.4 billion in March, down from $784.3 billion in February. This marks a continuation of a broader downtrend dating back to 2018. China’s holdings hit a post-financial crisis low of $759 billion in December 2024 — the lowest since February 2009 — reflecting Beijing’s reduced appetite for US sovereign exposure amid growing trade tensions and efforts to diversify its reserves.
Highlights:
Japan remains top foreign holder with $1.13 trillion in Treasuries.
UK surpasses China with $779 billion, likely reflecting hedge fund custody accounts.
China’s holdings fall to $765.4 billion in March, continuing long-term decline.
China’s Treasury ownership at lowest sustained levels since 2009.
Net Flows and Market Reaction: Strong Demand Despite Volatility
The benchmark 10-year Treasury yield began March at 4.18% and ended the month at 4.425%, reflecting modest upward pressure on yields. Despite this rise, transactional data showed net inflows of $123 billion into Treasury bonds and notes in March, following $106.2 billion of inflows in February. Foreign interest in US corporate bonds also remained strong, with $60.4 billion in inflows, while agency securities recorded outflows of $10.4 billion.
On the equities side, foreign investors added $10.4 billion in US stocks during March, though this was significantly lower than the $24.7 billion in February. Including banking flows, the overall net foreign acquisition of long- and short-term US securities showed a net outflow of $254.3 billion, slightly higher than February’s outflow of $248.9 billion. These figures reflect complex cross-border capital movements, highlighting the resilience of demand for US debt even as broader outflows intensified.
Highlights:
Net inflows into US Treasuries totaled $123 billion in March.
Foreign investment in US corporates reached $60.4 billion.
Agency securities saw $10.4 billion in net outflows.
Net foreign acquisitions of long/short-term securities and banking flows showed $254.3 billion in outflows.
