Foreign Holdings of U.S. Treasuries Drop to $9.25 Trillion, 5% Yield Faces Test

As of the end of July, the amount of U.S. Treasuries held by foreign investors has decreased to $9.25 trillion, down $50.4 billion from June, marking the lowest level since October 2025. The decline in holdings does not necessarily indicate a concentrated sell-off of U.S. Treasuries by overseas funds, as bond prices, exchange rates, and net buying and selling changes all affect the market value of holdings. In July, foreign residents still net purchased $40.6 billion in U.S. long-term securities, with official institutions net buying $44.4 billion and increasing their holdings of U.S. Treasury bills by $38.8 billion. Overall, foreign capital brought a net inflow of $83.7 billion to the U.S. financial markets that month. Major holders showed mixed performance: Japan reduced its holdings of U.S. Treasuries by $12.8 billion in July, bringing its total down to about $1.1 trillion; China reduced its holdings by $15.4 billion to $618 billion; the UK increased its holdings by $58.4 billion to $998.3 billion, approaching $1 trillion; France and Canada reduced their holdings by $41.5 billion and $33.3 billion, respectively. The yield on the U.S. 10-year Treasury recently broke above 5% again, with higher yields increasing the potential returns on U.S. Treasuries, while also reflecting the market's demand for higher compensation for U.S. inflation, fiscal deficits, and term risks. The market will be watching whether the 5% yield can attract overseas funds to increase their allocation to U.S. Treasuries.

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