Foreign investors increase holdings of US corporate debt, reinforcing America's prominence in bond markets.

Foreign investors increase holdings of US corporate debt, reinforcing America's prominence in bond markets.

Foreign investors have significantly increased their holdings of US corporate debt, underscoring the enduring appeal and prominence of the US bond market. According to the latest Treasury Department data analyzed by Citigroup Inc., overseas investors bought approximately $45 billion of US corporate notes in April, the highest amount in six months [1].

This robust demand highlights the resilience and attractiveness of the US corporate bond market. With over $7.5 trillion in high-grade US corporate bonds outstanding, the market offers unparalleled depth and liquidity, making it an attractive option for global investors [1]. Citigroup strategists Daniel Sorid and Mathew Jacob noted that the market's exceptional diversification by sector, quality, and duration further enhances its allure [1].

Despite geopolitical tensions and proposed tariffs by former President Donald Trump, foreign investors have not shifted their focus away from US debt. The swift recovery across credit, equities, and rates markets since April underscores the resilience of the US economy [1]. Even if investors consider diversifying their portfolios, the time and effort required to find and buy alternative securities in other markets may deter them from doing so [1].

However, some overseas buyers have pulled back. For instance, Canada was a net seller of $1.4 billion of US corporate notes in April, according to Treasury data analyzed by Citi [1]. Europe, with its improved yields and optimism about government spending, is emerging as a plausible alternative for many investors [1]. Nonetheless, the marginal dollar still has a higher chance of being allocated in the US, according to BlackRock's head of macro credit research, Amanda Lynam [1].

The US Treasury Secretary, Scott Bessent, further bolstered investor confidence by stating that the new G7 deal exempts US firms from the OECD’s 15% minimum tax. This deal ensures that U.S. companies will not face additional tax burdens and prevents them from paying over $100 billion to foreign governments in the next ten years [2]. This development aligns with the broader trend of foreign investors continuing to invest in the US bond market.

In summary, the recent increase in foreign holdings of US corporate debt underscores the enduring appeal and prominence of the US bond market. Despite geopolitical uncertainties and potential diversification opportunities, the US market's depth, liquidity, and resilience continue to attract global investors.

References:
[1] https://www.bloomberg.com/news/articles/2025-06-28/bond-binge-shows-america-is-still-exceptional-credit-weekly
[2] https://profit.pakistantoday.com.pk/2025/06/27/u-s-drops-plan-to-tax-foreign-investors-after-global-tax-deal/