Foreign investors’ holdings of U.S. Treasuries stayed close to a record high in April, despite the turmoil in financial markets in the wake of President Donald Trump’s plans to implement the biggest tariff hikes in more than a century.
Foreign holdings totaled $9.01 trillion for the month, the second-highest figure on record and down just $36 billion from March, Treasury Department figures showed yesterday. The drop mainly reflected net sales of U.S. notes and bonds by foreign private investors. Official entities were net buyers of longer-term Treasuries. Japan’s and Britain’s holdings increased, while China’s declined, the data showed. The drop in overall holdings met the expectation of some market participants.
After Trump unveiled his “Liberation Day” tariffs on April 2, stocks plunged—an event that typically drives haven demand for U.S. government securities. Instead, in the week after the trade-policy shock Treasuries logged their deepest decline in more than two decades. With the dollar also tumbling, the moves sparked concerns about a wholesale exodus of foreign investors from American assets.
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“The ‘Sell America’ narrative is an over-exaggeration,” Vishal Khanduja, head of the broad markets fixed-income team at Morgan Stanley Investment Management, said about the TIC data. “But we do expect slow and bumpy dollar depreciation.”
Treasury Secretary Scott Bessent back in April played down the moves, ascribing the Treasuries volatility to a de-leveraging wave by particular investors. He repeatedly said that data he had access to showed sustained foreign demand for American debt.
Japan, the biggest foreign holder of U.S. Treasuries, saw its holdings tick up by $3.7 billion in April, to $1.13 trillion. The UK stayed in second place, with its holdings climbing by $28.4 billion, to $807.7 billion. China, which in March slipped to become the number-three foreign holder, with the UK in second position, had $757 billion of Treasuries in April, down $8.2 billion from the previous month. Belgium, whose holdings include Chinese custodial accounts according to market analysts, went up by $8.9 billion, to $411 billion. Holdings of the Cayman Islands—viewed as a popular domicile for leveraged investors such as hedge funds—dipped $7 billion.
Canada, which has been subject to Trump tariffs as well as pressure over border security and even rhetoric suggesting it should become a part of the United States, saw its holdings of U.S. Treasuries slide by $57.8 billion, to $368.4 billion. That still leaves it up from January’s level.
While Treasuries’ yields have broadly stabilized in recent weeks, the longest-dated securities have suggested concerns about the large amount of U.S. borrowing. Republican lawmakers have been advancing a tax-cut bill that’s projected to send federal government debt heading to a record high in coming years, and questions around fiscal sustainability have undermined the case for buying the government’s longest-dated securities. Investors have stepped up scrutiny of Treasury auctions in light of the angst over fiscal deficits and broader U.S. economic and foreign policies.
A poor reception for a 20-year bond sale in May contributed to a market selloff, though concerns were allayed by better receptions for 30-year debt last week and the most recent 20-year offering on Monday. Day-to-day price moves have been another focus, and the failure of Treasuries to rally during the recent Israel-Iran attacks renewed questions over their haven status.
“It did bother me,” Earl Davis, head of fixed income and money markets at BMO Global Asset Management, said on Bloomberg TV Monday of Friday’s retreat in U.S. bonds. “We went more underweight in Treasuries after we saw that.”
Even so, for now, the data offers validation for Bessent’s regular assurances about sustained overseas interest in Treasuries.
“We don’t really see any sign of foreign investors pulling back from the Treasuries market,” said Jamie Patton, co-head of global rates at TCW Group. “There’s a big difference between valuation and [confidence in] the reserve status of the U.S. dollar or U.S. Treasuries as a de facto safe asset.”
Beyond Treasuries, yesterday’s report showed that foreign investors were net sellers of long-term agency bonds—a category that includes Fannie Mae and Freddie Mac debt—and of equities, while they were net buyers of long-term corporate bonds.
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