Foreign U.S. Treasury Holdings Fall as Japan, UK and China Cut Positions

Foreign holdings of U.S. Treasuries declined in June as major holders including Japan, the United Kingdom and China reduced their positions, according to U.S. Treasury Department data released Monday.

Total foreign holdings of U.S. government debt fell to $9.299 trillion in June from $9.371 trillion in May. Despite the monthly decline, overseas holdings of U.S. Treasuries remained 2.3% higher than a year earlier.

Japan maintained its position as the largest foreign holder of U.S. Treasuries, although its holdings dropped 2.3% to $1.116 trillion from $1.143 trillion in May. Japan's Treasury holdings previously peaked at $1.325 trillion in November 2021.

The United Kingdom, the second-largest foreign holder, reduced its Treasury holdings by about 1% to $939.9 billion from $948.6 billion a month earlier. The UK serves as an important custody center for international investors, meaning its Treasury flows are frequently watched as an indicator of hedge fund positioning.

China recorded a sharper decline, with its U.S. Treasury holdings falling 4% to $633.4 billion from $659.3 billion in May. That marked China's lowest level since September 2008, when its holdings stood at $618.2 billion.

China remained the third-largest foreign holder of U.S. government debt, but its Treasury portfolio has now fallen by more than 13% compared with the same period a year earlier.

Transaction data showed Treasury securities attracted $6.8 billion in net inflows during June, substantially below the $56.6 billion recorded in May. U.S. corporate bonds received $35.6 billion, also down from the previous month's $52.5 billion.

Meanwhile, foreign investment in U.S. equities reached $181.4 billion in June, compared with $134.6 billion in February.

Overall net capital inflows into the United States totaled $133.5 billion in June, edging higher from $131.5 billion in May, even as major foreign investors trimmed their U.S. Treasury holdings.