Foreign demand for Treasuries slips in September, Japan boosts buying

Foreign demand for U.S. Treasuries softened in September as overseas investors trimmed their holdings for the first time in six months, newly released Treasury Department data show. The figures were delayed by the federal government’s 43-day shutdown, with the October report now slated for 18 December.

Overall foreign Treasury holdings slipped to $9.249 trillion in September, down slightly from August but still 5.5% higher than a year earlier. The headline trend masked notable divergences among major holders.

• Japan, the largest overseas creditor to Washington, continued to ramp up its buying. Its holdings rose to $1.189 trillion, the highest since August 2022, and marked a ninth straight month of accumulation.
• China, by contrast, continued its slow multi-year reduction, with holdings edging down to $700.5 billion. Analysts attribute the decline to both strategic diversification away from the U.S. dollar and Beijing’s need to support the yuan amid weaker export inflows and a slower domestic economy. China remains the third-largest holder of Treasuries, behind the U.K.
• The United Kingdom also trimmed its exposure, cutting its holdings to $865 billion from just over $904 billion in August.

On a transactions basis, foreign buying of Treasuries cooled sharply to $25.5 billion, less than half the August figure and well below May’s large $147 billion inflow, the biggest since 2022.

However, foreign appetite for U.S. risk assets strengthened elsewhere: overseas investors bought $132.9 billion in U.S. equities, a sharp turnaround from July’s equity outflows.

Despite softer Treasury demand, the U.S. still recorded net capital inflows of $190.1 billion, modestly above August, reinforcing ongoing external demand for U.S. assets.

This article was written by Eamonn Sheridan at investinglive.com.