Foreign Holdings of US Treasuries Surge to All-Time High
Foreign Holdings Reach Record High
Foreign holdings of U.S. Treasuries reached an all-time high in December, climbing for the second consecutive month, according to data from the Treasury Department. The total holdings of U.S. Treasuries rose to $8.06 trillion in December, up from a previous record of $7.808 trillion in November, marking a 10.5% increase from the previous year.
Increased Buying Trend Continues
The surge in foreign holdings of U.S. Treasuries follows a trend of increased buying over the last few months, driven by a drop in yields as the market anticipated interest rate cuts by the Federal Reserve.
Leading Holders of U.S. Treasuries
The three largest holders of U.S. Treasuries, Japan, China, and the UK, were at the forefront of the surge in purchasing U.S. government debt.
Japanese Investors
Japanese investors raised their holdings of U.S. Treasuries to $1.138 trillion in December, the highest level since August 2022, solidifying Japan’s position as the largest non-U.S. holder of U.S. government debt.
China’s Rise
China’s holdings of U.S. Treasuries also saw a significant increase, rising to $816.3 billion in December from $782 billion in November. This marked the second consecutive month of growth after a prolonged decline, with China’s Treasury holdings dropping to the lowest level since March 2009 in October last year.
UK’s Record High
Meanwhile, the UK listed its Treasury holdings at a record high of $753.7 billion in December, contributing to the overall surge in foreign acquisitions of U.S. Treasuries.
Market Trends
The surge in foreign holdings of U.S. Treasuries corresponded with a decline in yields, with the benchmark rate dropping from 4.22% to 3.86% in November, signaling a shift in the Federal Reserve’s stance from a tightening bias to a neutral position.
Market Inflows
U.S. Treasuries, equities, corporates, and agencies all showed significant inflows during the month, reflecting a positive sentiment among foreign investors towards U.S. assets.
Net Foreign Acquisitions
Overall, the net foreign acquisitions of long-term and short-term securities, as well as banking flows, saw a net inflow of $139.8 billion in December, indicating strong foreign interest in the U.S. market.
