By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – Foreign holdings of U.S. Treasuries soared to a record high in March, data from the Treasury Department showed on Friday, rising for a third straight month, as demand for U.S. government debt remained robust a few months after President Donald Trump took office.
Holdings of U.S. Treasuries surged to $9.05 trillion in March, an all-time peak and up more than $233 billion from $8.81 trillion in February. Compared with a year earlier, Treasuries owned by foreigners rose nearly 12%.
Some analysts said that trend could change in April as the Trump administration introduced a massive trade shock on April 2nd that saw effective tariff rates surge, particularly on Chinese goods.
That fueled a U.S. Treasuries sell-off that, at one point, pushed benchmark 10-year yields more than 70 basis points (bps) higher to nearly 4.6% over the April 3-11 period. The selloff may have included selling from foreign investors, analysts said.
Trump has since paused the imposition of tariffs for 90 days, and the Treasuries market has stabilized somewhat, although foreign investors are likely to have remained leery of U.S. assets.
Data also showed that UK investors have overtaken China as the second largest non-U.S. holder of Treasuries, with holdings of $779 billion. UK is typically considered a custodial account, which is generally a proxy for hedge funds. Other countries used by hedge funds for custody services include Cayman Islands and the Bahamas.
Japan remains the biggest Treasury debt holder, with a stash of $1.13 trillion in March, up about 0.4% from the $1.126 trillion held in February. Japan’s load of Treasuries rose for a second straight month.
China, on the other hand, reduced its stash of Treasuries to $765.4 billion in March, down from $784.3 billion the previous month. In December last year, China’s holdings were $759 billion, the lowest since February 2009 when the country’s stock of Treasuries dropped to $744.2 billion.
Treasury holdings by Chinese investors have been on a downward trajectory since 2018, analysts said.
The benchmark 10-year Treasury yield started the month of March at 4.18% and ended it slightly higher at 4.425%.
Major U.S. asset classes also showed a mix of inflows and outflows during the month, the data showed.
On a transactional basis, holdings of Treasury bonds and notes showed a net inflow of $123 billion in March, following inflows of $106.2 billion in February.
Foreign investors continued to buy U.S. corporates, with $60.4 billion in inflows, with agencies showing outflows of $10.4 billion, data showed.
U.S. equities, meanwhile, posted inflows of $10.4 billion in March, down from $24.7 billion in the previous month.
Overall, net foreign acquisitions of long- and short-term securities, including banking flows, showed a net outflow of $254.3 billion in March, up slightly from $248.9 billion posted in February.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Chris Reese)
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