Foreign holdings of U.S. Treasuries soared to a historic high in February, marking the fifth consecutive monthly increase, according to the latest data released by the Treasury Department. The total holdings surged to an impressive $7.965 trillion, showing a notable uptick from the revised figure of $7.945 trillion reported in January. This upward trajectory reflects a significant 8.7% increase compared to the same period the previous year, indicating robust international demand for U.S. government debt securities.
Among the countries experiencing substantial growth in their Treasury holdings, Belgium stood out with a remarkable increase of $27 billion, bringing its total holdings to $320 billion. Meanwhile, Japan, widely recognized as the largest non-U.S. holder of Treasuries, saw its holdings climb to $1.167 trillion, marking the highest level since August 2022. This surge in foreign investments underscores the continued attractiveness of U.S. Treasuries as a safe haven asset and reflects investor confidence in the stability of the U.S. economy and financial system.
Investors have been closely monitoring Japan’s potential intervention in the currency market to bolster the yen, particularly as the currency recently hit a 34-year low against the dollar. Japan’s Treasury holdings experienced a significant decline of $131.6 billion in September and October 2022 as the country intervened to strengthen the yen, highlighting the potential impact of currency market dynamics on foreign holdings of U.S. Treasuries.
In contrast, China’s holdings of Treasuries decreased to $775 billion in February, representing the second-largest decline among the 20 major countries listed by the Treasury. This downward trend in China’s Treasury holdings has persisted, reaching the lowest level since March 2009. The decline in China’s Treasury holdings may reflect various factors, including diversification of reserves and changes in economic policy priorities.
Britain’s Treasury holdings experienced a notable increase, reaching $700.8 billion in February, rising by approximately $9 billion from January. This increase underscores the importance of U.S. Treasuries in global investment portfolios and reflects ongoing international demand for U.S. government debt securities.
The benchmark 10-year Treasury yield rose from 3.863% to 4.252% over the course of February, driven by robust economic data releases and expectations of a delayed interest rate cut by the Federal Reserve. Despite the increase in Treasury yields, major U.S. asset classes saw inflows during the month, indicating continued investor confidence in the resilience of the U.S. economy.
Overall, net foreign acquisitions of long- and short-term securities, as well as banking flows, resulted in a net inflow of $51.6 billion in February, contrasting with the previous month’s outflows of $30.8 billion. This influx of foreign capital underscores the global importance of U.S. financial markets and the enduring appeal of U.S. Treasuries as a cornerstone of international investment portfolios.
