Foreign Holdings of US Treasuries Decline in June, Japan Leads Reductions

Foreign investors reduced their holdings of US Treasuries in June, with Japan and China making significant sales, raising concerns about the future demand for US debt.

The US Treasury Department released data on Monday (July 17) showing that foreign holdings of US Treasuries decreased by $721 billion from the previous month, bringing the total to $9.3 trillion. Since hitting a historic high in February this year, foreign holdings have decreased in three of the past four months.

Japan, the largest foreign holder of US Treasuries, reduced its holdings by approximately $264 billion in June, bringing its holdings to $1.12 trillion, the largest reduction among all countries. China had the second-largest reduction, with its holdings decreasing by $259 billion to $6,334 billion. The UK holds $9,399 billion, a decrease of $87 billion from the previous month.

Notably, US Treasury Secretary Janet Yellen participated in a rare coordinated intervention in the foreign exchange market in late July. Market analysts believe that one of the considerations behind this move was to prevent Japan from selling large amounts of US Treasuries to support the yen, thereby pushing up US borrowing costs.

Paresh Upadhyaya, a strategist at Pioneer Investments, noted that the likelihood of Japan further reducing its holdings of US Treasuries has significantly decreased following the US intervention.

Since the beginning of the year, US Treasury prices have been under continuous pressure. Investors' concerns about the sustained high level of the US fiscal deficit and inflation exceeding target levels have made market sentiment more cautious.