Foreign Investors Sell U.S. Treasuries Amid Trade Tensions, Yields Rise
3min read In April, there was a significant sell-off of U.S. Treasuries by foreign investors, driven by escalating trade tensions and concerns over the attractiveness of U.S. debt. The trend was evident in data from the Bank of New York Mellon, which manages approximately $5.3 trillion in assets for global clients and provides insights into asset allocation trends.
The bank's data showed that foreign investors sold U.S. Treasuries at a pace that was nearly one standard deviation away from the norm, marking one of the most intense weekly sell-offs in recent years. This trend was particularly pronounced in the 11 trading days from April 4, during which eight days saw foreign selling.
The sell-off was triggered by the unexpected announcement of retaliatory tariffs by the U.S. President on April 2, which led to significant market volatility. The situation was exacerbated by the U.S. administration's reliance on foreign financing to support its fiscal deficit, raising concerns about the potential impact on U.S. government borrowing costs and the broader economy.
Japan's Ministry of Finance reported that private institutions, including banks and pension funds, sold $175 billion in long-term foreign bonds in the week ending April 4, followed by an additional $36 billion in the subsequent week. This marked one of the largest two-week sell-offs since records began in 2005.
The sell-off was also reflected in the demand for U.S. Treasuries at auctions. On April 11, the yield on 10-year U.S. Treasuries briefly approached 4.5% as foreign investors accelerated their exits. Although market expectations of a trade deal between the U.S. and China led to a partial rebound in Treasury prices, the yield remained elevated.
The auction of 2-year U.S. Treasuries on the same day also highlighted the weak demand from foreign investors. The auction of $690 billion in 2-year notes saw a high yield of 3.795%, 0.6 basis points above the pre-auction yield, indicating that investors required higher compensation to absorb the supply. Notably, indirect bidders, who typically represent foreign central banks and other institutions, accounted for only 56.2% of the total, the lowest since the height of the Silicon Valley Bank crisis in March 2023.
Analysts noted that the sell-off was driven by concerns over the attractiveness of U.S. Treasuries as a safe-haven asset, given the escalating trade tensions and the potential for higher borrowing costs. The trend was expected to continue as long as trade policies and other anti-globalization measures remained a focus of discussion.
The sell-off of U.S. Treasuries by foreign investors in April highlighted the growing concerns over the attractiveness of U.S. debt in the face of escalating trade tensions. The trend was evident in data from the Bank of New York Mellon, which showed that foreign investors sold U.S. Treasuries at a pace that was nearly one standard deviation away from the norm, marking one of the most intense weekly sell-offs in recent years. The sell-off was triggered by the unexpected announcement of retaliatory tariffs by the U.S. President on April 2, which led to significant market volatility. The situation was exacerbated by the U.S. administration's reliance on foreign financing to support its fiscal deficit, raising concerns about the potential impact on U.S. government borrowing costs and the broader economy. Japan's Ministry of Finance reported that private institutions, including banks and pension funds, sold $175 billion in long-term foreign bonds in the week ending April 4, followed by an additional $36 billion in the subsequent week. This marked one of the largest two-week sell-offs since records began in 2005. The sell-off was also reflected in the demand for U.S. Treasuries at auctions. On April 11, the yield on 10-year U.S. Treasuries briefly approached 4.5% as foreign investors accelerated their exits. Although market expectations of a trade deal between the U.S. and China led to a partial rebound in Treasury prices, the yield remained elevated. The auction of 2-year U.S. Treasuries on the same day also highlighted the weak demand from foreign investors. The auction of $690 billion in 2-year notes saw a high yield of 3.795%, 0.6 basis points above the pre-auction yield, indicating that investors required higher compensation to absorb the supply. Notably, indirect bidders, who typically represent foreign central banks and other institutions, accounted for only 56.2% of the total, the lowest since the height of the Silicon Valley Bank crisis in March 2023. Analysts noted that the sell-off was driven by concerns over the attractiveness of U.S. Treasuries as a safe-haven asset, given the escalating trade tensions and the potential for higher borrowing costs. The trend was expected to continue as long as trade policies and other anti-globalization measures remained a focus of discussion.
