The latest data released by the U.S. Department of the Treasury on Monday (August 17) shows that in June, foreign holdings of U.S. Treasury securities decreased by $72.1 billion to $9.299 trillion. Japan, China, and the UK were the main countries reducing their holdings, with Japan leading by reducing $26.4 billion in a single month, followed by China reducing $25.9 billion, bringing its holdings to the lowest level in nearly 18 years.
In terms of the amount held, this marks the third decrease in foreign holdings of U.S. Treasury securities within four months since reaching a historical peak in February this year. However, compared to the same period last year, total holdings in June increased by about 2.3%.
According to the Treasury International Capital (TIC) data released by the U.S. Department of the Treasury, Japan held approximately $1.1167 trillion in U.S. Treasury securities at the end of June, a decrease of $26.4 billion from May’s $1.1431 trillion, making it the largest foreign holder of U.S. Treasury securities outside the U.S.
China’s holdings decreased from $659.3 billion in May to $633.4 billion in June, a monthly decrease of $25.9 billion, a decrease of about 4%.
Reuters pointed out that this is China’s lowest level of U.S. Treasury holdings since September 2008, with a decrease of over 13% from a year ago. China remains the third largest foreign holder of U.S. Treasury securities, behind Japan and the UK.
The UK held $939.9 billion in U.S. Treasury securities in June, a decrease of $8.7 billion from the previous month. Reuters noted that the UK is an important asset custody center for global investors, and therefore, changes in its holdings are often regarded by the market as a reference for observing international investors, including hedge fund position changes.
Japan, China, and the UK collectively reduced their holdings by $61 billion in June, accounting for approximately 85% of the total decrease in foreign holdings of U.S. Treasury securities for that month.
Japan was the country with the largest reduction in holding U.S. Treasury securities in June. Market analysts believe that the decrease in Japan’s holdings is closely related to previous interventions in the foreign exchange market to support the yen.
Paresh Upadhyaya, a strategist at Pioneer Investments, said: “Japan’s selling is clearly related to forex intervention. There is no doubt that the large-scale selling of U.S. Treasury securities by Japan will not recur.”
Bloomberg reported that concerns about Japan selling a large amount of U.S. Treasury securities to support the yen have significantly decreased after U.S. Treasury Secretary Scott Bessent’s rare participation in U.S.-Japan coordinated forex intervention at the end of July.
Japan has long been the largest foreign holder of U.S. Treasury securities. Its holdings reached a peak of $13.25 trillion in November 2021 and remain significantly higher than other countries.
It is worth noting that the $72.1 billion reduction in foreign holdings of U.S. Treasury securities in a single month does not mean that overseas investors actually sold the same amount of U.S. Treasury securities in June.
The Treasury Department’s holdings statistics reflect not only actual buying and selling but also factors such as changes in bond prices, custody arrangements, and other considerations.
In terms of trading data, Reuters reported that foreign investors still saw a net inflow of $6.8 billion into U.S. Treasury securities in June, but it was significantly lower than the $56.6 billion in May.
During the same period, the net inflow of funds into U.S. corporate bonds by foreign investors was $35.6 billion, while U.S. stocks saw an inflow of $18.14 billion. Overall, in June, there was a net capital inflow of $133.5 billion into the U.S., higher than May’s $131.5 billion.
Therefore, the decrease in U.S. Treasury holdings in June does not necessarily mean that foreign funds are exiting U.S. assets.