Foreign Treasury Demand Slips as Investors Pivot Toward U.S. Stocks
Key Takeaways
Overseas appetite for U.S. government debt cooled in September, marking the first monthly decline in six months. The pullback comes from a delayed data release following a 43-day federal shutdown, with the October update now expected on December 18. While overall foreign holdings dipped slightly, major investors took divergent paths and rotated more capital into U.S. equities.
Total foreign holdings of U.S. Treasuries eased to $9.249 trillion in September, down marginally from August but still 5.5% higher year over year. Japan extended its buying streak for a ninth consecutive month, lifting holdings to $1.189 trillion—its highest level since August 2022. China continued its gradual reduction to $700.5 billion as it diversifies reserves and supports the yuan amid softer exports and slower domestic growth. The United Kingdom also trimmed exposure, lowering its holdings to $865 billion from just over $904 billion in August.
On a transactions basis, net foreign purchases of Treasuries slowed sharply to $25.5 billion—less than half the August pace and well below May’s $147 billion surge. However, overseas investors increased risk exposure elsewhere, buying $132.9 billion in U.S. equities and helping deliver total net capital inflows of $190.1 billion, modestly above the prior month. The figures suggest continued international demand for U.S. assets, even as bond buying moderates.
Key Points – Foreign holdings of U.S. Treasuries slipped to $9.249 trillion in September, up 5.5% from a year earlier. – Japan increased its Treasury holdings to $1.189 trillion, a ninth consecutive monthly rise. – China reduced holdings to $700.5 billion amid diversification and currency support efforts. – The U.K. cut its exposure to $865 billion, down from just over $904 billion in August. – Net foreign purchases of Treasuries slowed to $25.5 billion, while U.S. equity inflows reached $132.9 billion. – Net capital inflows totaled $190.1 billion, signaling ongoing global demand for U.S. assets.
