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US Treasury Bonds Hit Record Highs in Foreign Investment Surge in August

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Foreign holdings of US Treasuries soar to all-time peak in August, data shows

In August, foreign holdings of U.S. Treasuries climbed to $8.503 trillion, marking an increase from $8.338 trillion the month before. This represents an 11.5% rise compared to the same period last year.

The pivotal 10-year Treasury note saw its yield begin August at 3.978% and close the month at 3.844%, a decrease of 13.4 basis points. U.S. Treasury yields trended downward throughout August, influenced by Federal Reserve officials signaling the start of a rate-cutting phase, aiming to bring inflation closer to the 2% goal.

Subsequently, on September 18, the Federal Reserve executed a significant rate reduction of 50 basis points.

Japan maintained its position as the largest foreign owner of U.S. Treasuries, with its holdings peaking at $1.129 trillion in August—the highest since March—marking the third month of consecutive growth.

Conversely, China’s Treasury holdings continued their decline for the second consecutive month in August, falling to $774.6 billion. This followed a drop to $767.4 billion in March, the lowest since January 2010, when the holdings had decreased to $765.2 billion.

It’s noteworthy that China’s Treasury investments had reached an all-time high of $1.315 trillion back in June 2011.

During August, major U.S. asset categories also experienced capital inflows, according to recent data.

Specifically, foreign transactions in U.S. Treasuries resulted in inflows of $19.2 billion, a decrease from $55.9 billion in July.

There was also continued foreign investment in U.S. corporate debt and agency securities, with inflows totaling $41.7 billion and $4.2 billion, respectively.

U.S. stocks attracted substantial foreign investment as well, with inflows hitting $64.8 billion in August, an increase from $43.7 billion the previous month.

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Overall, net foreign acquisitions of U.S. long- and short-term securities, including transactions through banking channels, amounted to a net inflow of $79.2 billion in August, a sharp decline from $159.1 billion in July.

Meanwhile, U.S. residents boosted their investments in long-term foreign securities, recording net purchases of $18.4 billion during the month. This was a significant turnaround from July, when they had offloaded $400 million worth of foreign securities.

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