Shipping containers at the Port of Long Beach in Long Beach, California, on April 28, 2025. Photographer: Eric Thayer/Bloomberg.
President Donald Trump’s proposed tariffs in April stirred fears that the era of U.S. exceptionalism was over, and that European and Asian money managers would cut back on buying U.S. corporate debt. So far, it’s not happening, and foreign investors are buying more American debt than they have in months.
In April, overseas investors bought about $45 billion of U.S. corporate notes, the most in six months, according to the latest Treasury Department data analyzed this week by Citigroup Inc. strategists including Daniel Sorid and Mathew Jacob. This robust demand underscores how powerful the status quo is. Few other debt markets are as deep as the United States’. There’s about $7.5 trillion of high-grade U.S. corporate bonds outstanding, according to Bloomberg index data, more than double the size of its euro-denominated counterparts.
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“The U.S. corporate bond market plays too important of a role in global investment portfolios for the turmoil of April to make a significant dent in demand,” said Citigroup’s Sorid in an interview.
Even if investors look to shift money out of the United States, it will take them time to find and buy the securities they need. There is extraordinary diversification by sector, quality, and duration available in the U.S., Sorid said. On top of that, liquidity in the credit market has improved since the Federal Reserve stepped in as the lender of last resort at the height of the 2020 pandemic.
That made credit an attractive option for investors that were looking to scale back from Treasuries, Sorid said. Foreign demand for U.S. Treasuries declined sharply in April, with foreign holdings of long-term U.S. government bonds decreasing by $111 billion on a valuation-adjusted basis and their T-bill holdings falling by $10 billion, according to Citi. Mortgage bonds took a hit too.
U.S. corporate bonds did not see a broad selloff, although some overseas buyers did pull back in April. Canada was a net seller of $1.4 billion of U.S. corporate notes in April, according to Treasury data analyzed by Citi.
Europe is a plausible alternative for many investors, according to Amanda Lynam, head of macro credit research at BlackRock Inc. After many years of negative interest rates, European debt markets are finally seeing better yields, and there’s a lot of optimism that government spending for areas including defense can help support growth over the medium to long term, said Lynam on UBS’s Market Moves podcast. In addition, the European Central Bank (ECB) still owns a decent portion of bonds that it bought during the pandemic, she said. In some ways, that forces investors to move down the quality spectrum because there’s a lack of bonds available to buy.
“The marginal dollar has a higher chance of being allocated at home as opposed to in the U.S. now that there’s a return of yield support in that market,” said Lynam, referring to the European market. She added that even if Europe is attractive at the margin, U.S. exceptionalism isn’t generally fading among investors.
That may change over time. Barings, the $442 billion asset manager, believes demand for European corporate debt will rise. “U.S. exceptionalism is a little bit more questioned; investors are increasingly concerned about U.S. economic policy,” Mike Best, a high-yield and senior loan portfolio manager at the firm, said on the Bloomberg Intelligence Credit Edge podcast.
But talk of foreign investors losing interest in the United States has been brewing for years, and little has come of it. The swift recovery across credit, equities, and rates markets since April underscores the resilience of the U.S. economy, according to Jim Zelter, President of Apollo Global Management. “The market has moved on,” Zelter said on Bloomberg TV this week.
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