Foreign Investors Maintain High U.S. Treasury Holdings Despite Tariff Turmoil

On June 18, the U.S. Treasury Department released its Treasury International Capital (TIC) report, revealing that foreign investors held nearly a record high amount of U.S. Treasury securities in April. The total value of U.S. Treasuries held by foreign investors stood at 9.01 trillion dollars, marking a slight decrease of 360 million dollars from March. This minor reduction primarily reflected the actions of foreign private investors, who slightly reduced their holdings.

Despite the market turbulence caused by the U.S. President's plan to implement the largest tariff measures in over a century, foreign investors maintained a high level of investment in U.S. Treasuries. The data indicated that while there was a slight decline in holdings, it was not indicative of a significant sell-off. This stability suggests that foreign investors remain confident in the safety and liquidity of U.S. Treasuries, even amidst global market volatility.

The report highlighted that the total value of U.S. Treasuries held by foreign investors in April was the second-highest on record, just below the all-time high of 9.049 trillion dollars reached in March. This trend underscores the enduring appeal of U.S. Treasuries as a safe-haven asset, particularly during times of economic uncertainty. The slight decrease in holdings was attributed to the actions of foreign private investors, who reduced their positions by 360 million dollars.

The data also revealed that the decline in foreign holdings of U.S. Treasuries was relatively modest, indicating that the market impact of the U.S. President's tariff policies was not as severe as initially feared. This stability in foreign investment in U.S. Treasuries suggests that investors are not overly concerned about the potential for a large-scale sell-off, despite the ongoing trade tensions and market volatility.

In summary, the TIC report for April showed that foreign investors continued to hold a significant amount of U.S. Treasuries, with the total value remaining near historical highs. This trend reflects the enduring appeal of U.S. Treasuries as a safe-haven asset, even in the face of market turbulence and geopolitical risks. The slight decrease in holdings was not indicative of a significant sell-off, suggesting that foreign investors remain confident in the stability and liquidity of U.S. Treasuries.

Japan's holdings of U.S. Treasuries increased by 370 million dollars in April, marking the fourth consecutive month of increase, reaching 1.1345 trillion dollars. Since surpassing China in June 2019, Japan has been the largest foreign holder of U.S. Treasuries.

In April, the U.K. increased its holdings of U.S. Treasuries by 284 million dollars, reaching 807.7 billion dollars. This made the U.K. the second-largest holder of U.S. Treasuries in March of this year.

China's holdings of U.S. Treasuries decreased by 820 million dollars in April, reaching 757 billion dollars. Since April 2022, China's holdings of U.S. Treasuries have remained below 1 trillion dollars. Analysts generally believe that due to changes in Sino-U.S. relations and the trend of diversifying foreign exchange reserves, China's holdings of U.S. Treasuries may continue to decline steadily. Future fluctuations in China's holdings will be largely influenced by Sino-U.S. relations.

In recent years, China's reduction in U.S. Treasury holdings has been driven by the need to diversify its foreign exchange reserves. Increasing the proportion of gold holdings is one way to achieve this diversification. As of April last year, the People's Bank of China had increased its gold holdings for a record 18 consecutive months. Although there was a temporary pause, gold purchases have since resumed. Data released earlier this month showed that China's gold reserves stood at 73.83 million ounces at the end of May, up 60,000 ounces from the end of April. This marks the seventh consecutive month of gold reserve increases by the People's Bank of China since November 2024.

In April, the Cayman Islands, a popular registration location for hedge funds and other leveraged investors, reduced its holdings of U.S. Treasuries by 700 million dollars, reaching 448.3 billion dollars. Market participants noted that the volatility in the U.S. Treasury market in April was partly due to hedge funds unwinding so-called "basis trades."

Belgium's holdings of U.S. Treasuries increased by 890 million dollars in April, reaching 411 billion dollars.

Canada's holdings of U.S. Treasuries decreased significantly by 57.8 billion dollars in April, reaching 368.4 billion dollars. However, this is still an increase from January. Analysts attributed this to the impact of tariffs and border security pressures imposed by the U.S. President.