Foreign holdings of US Treasuries fall as Japan, China cut exposure

Foreign holdings of US Treasuries declined in March, according to data released by the US Treasury Department on Monday, with Japan and China leading the reduction in exposure.

Total foreign-owned US Treasuries fell 1.5% to $9.348 trillion in March from a record high of $9.487 trillion in February.

Despite the monthly decline, foreign holdings were still up 3.3% compared to the same period a year earlier.

Japan remains the largest foreign holder despite a decline

Japan remained the largest non-US holder of Treasuries, although its holdings dropped sharply during the month.

Japanese Treasury holdings declined nearly 4% to $1.192 trillion in March from $1.239 trillion in February.

The data also showed that Japan’s holdings remained below the peak of $1.325 trillion recorded in November 2021.

The decline reflected a broader reduction in foreign Treasury ownership during the month.

China holdings hit their lowest level since 2008

China also reduced its exposure to US government debt in March.

The country’s Treasury holdings fell 6% to $652.3 billion from $693.3 billion in February.

The March figure marked the lowest level for China’s Treasury holdings since September 2008, when holdings stood at $618.2 billion.

China remained the third-largest non-US owner of Treasuries despite the decline.

Treasury holdings held by China have now fallen more than 14% since the beginning of 2025.

UK holdings rise during the month

In contrast to Japan and China, the United Kingdom increased its Treasury holdings in March.

UK holdings rose 3.3% to $926.9 billion from $897.3 billion in February, making the country the second-largest foreign holder of US Treasuries.

The UK is widely viewed as a major custody hub for global investors.

Flows through the country are often interpreted by market participants as a proxy for hedge fund positioning and broader international investment activity.

Treasury inflows improve in March

The Treasury Department data also showed stronger inflows into US government debt during the month.

On a transaction basis, Treasury inflows increased to $13.5 billion in March from $2.6 billion in February.

US corporate bonds also attracted higher inflows.

Corporate bond inflows rose to $76.8 billion in March, compared with $53.9 billion in the previous month.

Meanwhile, US equities continued to record inflows, although at a slower pace.

Equity inflows stood at $10.5 billion in March, down from $23.8 billion in February.

Overall, capital inflows weaken

Overall net capital inflows into the United States eased during March compared with the previous month.

The data showed total net capital inflows of $150.7 billion in March, down from $182.7 billion recorded in February.

The figures highlighted a mixed trend in foreign investment flows, with weaker Treasury and equity demand partially offset by stronger interest in US corporate bonds.

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