On Friday, May 16 (Eastern Time), the U.S. Treasury Department released the International Capital Flows Report (TIC), showing that foreign purchases of U.S. Treasury bonds grew significantly for the second consecutive month in March, reaching a new high. In March, the total holdings of U.S. Treasury bonds by overseas creditors increased by $233.1 billion to $9.05 trillion. March came on the eve of the recent turmoil in the U.S. Treasury market.
The latest TIC data reflects the demand for U.S. Treasuries from foreign investors on the eve of Trump’s announcement of large-scale tariff hikes. Overseas demand for U.S. Treasuries has always been a focal point in the bond market, especially since Trump initiated large-scale tariff increases.
After Trump announced reciprocal tariff measures on April 2 this year, it triggered a sell-off in the U.S. Treasury, dollar, and stock markets—a “triple sell-off” in equities, bonds, and foreign exchange. The $29 trillion U.S. Treasury market experienced its worst sell-off since 2001. The Bloomberg Dollar Spot Index fell 1.8% in March and then dropped nearly 4% in April. The yield on the 10-year U.S. Treasury note was relatively stable in March but surged from 3.86% to 4.59% in April.
TIC data in the coming months will be closely watched. Although the data on U.S. Treasury holdings in April will not be released until June, some market participants are skeptical of this narrative. Looking at the long-term trend, the share of foreign investors in the U.S. Treasury market has declined from a peak of more than half in 2008, and data compiled by Bloomberg shows that this share has been around 30% in recent years.
Japan’s holdings of U.S. Treasury bonds increased by $4.9 billion in March, marking the third consecutive month of growth, to $1.1308 trillion. Since surpassing mainland China in holdings in June 2019, Japan has remained the largest overseas holder of U.S. Treasury bonds.
