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Foreign investors’ stockpile of US government debt fell only modestly in April despite turbulence in the Treasury market driven by Donald Trump’s “liberation day” tariff announcement.
International holdings fell $36.1bn in April from the previous month to about $9tn, just shy of the record high hit in March, according to a report from the Treasury department on Wednesday.
Trump’s April 2 “liberation day” announcement of steep levies on trading partners ignited major market ructions, sending long-term US bond yields soaring. The move only partially reversed after the president paused the tariffs a week after he threatened to impose them.
The muted change in foreign holdings in April signals international investors did not exit the market en masse, as some analysts had feared. It is still notable, given that Treasury debt tends to function as a haven asset during moments of global turmoil.
Foreign investors own roughly a third of all Treasury bonds: their demand for American debt has allowed the US to fund its government for decades, without meaningfully raising taxes or cutting fiscal spending.
China’s recorded holdings of Treasuries decreased to the lowest level since 2009, at $757bn. However, Belgian holdings of Treasuries, which are seen as a proxy for Chinese holdings offshore, rose. The biggest decline came from Canada, which shed $57.8bn of Treasuries. Japan and the UK, the two biggest holders of US debt, added to their stockpiles.
The data from the Treasury department does not adjust for changes in market value of the securities over the course of the month.
There has been some evidence of a retreat from Treasuries in the weekly Federal Reserve’s custodial data, said Meghan Swiber, US rates strategist at Bank of America.
The custodial data, which measures Treasuries held by foreign officials at the Fed, suggests foreign institutions have sold roughly $63bn worth of US debt since late March, according to Swiber. The continued sales over the course of May and June could mean the next sets of TIC data [Treasury international capital] could show more outflows.
The Treasury holdings data for May and June are expected to provide indications of how worried investors are about Trump’s budget bill and the growing US deficit. The prospect of a wider deficit prompted Moody’s to downgrade the US credit rating last month and has pushed prices in the market lower and yields higher.
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