[NEW YORK] Foreign holdings of US Treasuries soared to a record high in March, data from the Treasury Department showed on Friday (May 16), rising for a third straight month, as demand for US government debt remained robust a few months after US President Donald Trump took office.
Holdings of US Treasuries surged to US$9.05 trillion in March, an all-time peak and up more than US$233 billion from US$8.81 trillion in February. Compared with a year earlier, Treasuries owned by foreigners rose nearly 12 per cent.
Some analysts said that trend could change in April as the Trump administration introduced a massive trade shock on Apr 2 that saw effective tariff rates surge, particularly on Chinese goods.
That fuelled a US Treasuries sell-off that, at one point, pushed benchmark 10-year yields more than 70 basis points (bps) higher to nearly 4.6 per cent over the Apr 3 to 11 period. The sell-off may have included selling from foreign investors, analysts said.
Trump has since paused the imposition of tariffs for 90 days, and the Treasuries market has stabilised somewhat, although foreign investors are likely to have remained leery of US assets.
Data also showed that UK investors have overtaken China as the second largest non-US holder of Treasuries, with holdings of US$779 billion. UK is typically considered a custodial account, which is generally a proxy for hedge funds. Other countries used by hedge funds for custody services include Cayman Islands and the Bahamas.
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Japan remains the biggest Treasury debt holder, with a stash of US$1.13 trillion in March, up about 0.4 per cent from the US$1.126 trillion held in February. Japan’s load of Treasuries rose for a second straight month.
China, on the other hand, reduced its stash of Treasuries to US$765.4 billion in March, down from US$784.3 billion the previous month. In December last year, China’s holdings were US$759 billion, the lowest since February 2009 when the country’s stock of Treasuries dropped to US$744.2 billion.
Treasury holdings by Chinese investors have been on a downward trajectory since 2018, analysts said.
The benchmark 10-year Treasury yield started the month of March at 4.18 per cent and ended it slightly higher at 4.425 per cent.
Major US asset classes also showed a mix of inflows and outflows during the month, the data showed.
On a transactional basis, holdings of Treasury bonds and notes showed a net inflow of US$123 billion in March, following inflows of US$106.2 billion in February.
Foreign investors continued to buy US corporates, with US$60.4 billion in inflows, with agencies showing outflows of US$10.4 billion, data showed.
US equities, meanwhile, posted inflows of US$10.4 billion in March, down from US$24.7 billion in the previous month.
Overall, net foreign acquisitions of long and short-term securities, including banking flows, showed a net outflow of US$254.3 billion in March, up slightly from US$248.9 billion posted in February. REUTERS
