Only four of the top 20 holders of U.S. debt have reduced their exposure to Treasury securities, official data shows.
China and Japan, the world’s two largest holders of U.S. debt, increased their holdings of Treasury securities in February, new government data show.
According to the latest Treasury International Capital System report released on April 16, foreign holdings of U.S. Treasury securities increased by 3.4 percent to a record $8.817 trillion in February. This is up 10.2 percent, or $818 billion, from a year ago.
Japan, the largest owner, added more than 4 percent to a 10-month high of $1.125 trillion.
China’s stockpile rose by about $24 billion, more than 3 percent, to $784.3 billion, the highest level since June 2024. This was Beijing’s second consecutive month of adding to its holdings, a tepid reversal of its long-term initiative to diversify its portfolio away from U.S. dollar assets.
Other markets increased their exposure to U.S. government bonds, including Canada ($55 billion), Belgium ($20 billion), the United Kingdom ($10 billion), and Hong Kong ($17 billion).
Only four countries reduced their holdings out of the top 20 foreign holders: Germany ($2 billion), Norway ($11 billion), Saudi Arabia ($500 million), and Switzerland ($11 billion).
While the Treasury numbers are dated, they still highlighted that nations increased their holdings before President Donald Trump unveiled his long-awaited sweeping tariff plans.The U.S. Treasury market is one area that has been a source of unexpected volatility in recent weeks. Despite Wall Street turmoil, yields on long-term U.S. government bonds increased after the April 2 “Make America Wealthy Again” event. Typically, yields will come under pressure as investors flee to conventional safe-haven assets. Instead, following the dramatic drop on Wall Street, yields have risen and have remained elevated.
The benchmark 10-year Treasury yield sits at around 4.3 percent, up from as low as 3.86 percent during the April 4 trading session. While it has come down from 4.5 percent registered on April 11, it is still as high as before the president’s tariff announcement.
Investors have been confounded by the movement, speculating that China and Japan could dump Treasury securities in response to Trump’s reciprocal tariffs.
Federal Reserve Chair Jerome Powell thinks it is hard to determine what is happening in real-time.
“I’ve had a lot of experience with significant moves, for example, in the bond market, where there’s a narrative that people land on, and then two months later, you look back and go, that was completely wrong,” Powell said at an April 16 Economic Club of Chicago event. “I think it’s very premature to say exactly what’s going on.”
While some deleveraging might occur among overleveraged hedge funds, the U.S. central bank chief said that the markets are operating “as you would expect them to in this time of high uncertainty.”
Still, many experts worry that global investors could be shying away from the world’s largest economy.
JPMorgan Chase strategists say that foreign investors have been broadly selling U.S. assets, whether equities or bonds, “in an atypical way.”
According to Steve Englander, the head of research and North America macro strategy at Standard Chartered Bank, the key debate moving forward is whether public and private investors have lost confidence in the United States after decades of trade relationships and negotiations.
“If tariff policy can be dictated by one side and enforced by economic threats, what is to stop analogous policy decisions on bonds and other U.S. assets held by non-U.S. residents?” Englander said in a note.
In an interview with CBS News host Margaret Brennan, Minneapolis Fed Bank President Neel Kashkari noted that a slumping dollar and rising yields could be a sign that foreign investors are parking their money elsewhere.
“It could be that investors are saying, ‘Hey, there are other places we also want to invest.’ That it won’t just be everybody wants to pour money in America,” Kashkari said.
The U.S. dollar index, a gauge of the buck against a weighted basket of currencies including the Japanese yen and British pound, has plunged this year, falling by more than 8 percent year to date.