Foreign holdings of U.S. Treasuries surged in February by the most since June 2021, with Canada and Japan among the biggest net buyers during a month that preceded the bond market’s recent turmoil.
Total overseas holdings of Treasury securities jumped by US$290 billion to a record $8.82 trillion in February, Treasury Department figures showed Wednesday. Foreign buyers purchased a net $106.2 billion of long-term, and $73.2 billion of short-term, Treasuries in the month.
Canada, which had mounted net sales of Treasuries in January, more than made up for those in February, with net purchases of $46.5 billion in long-term Treasuries, the data showed. Some market observers had noted the January transactions came alongside pressure by President Donald Trump on the U.S. northern neighbor. Tensions have since escalated further.
Japan’s holdings, the largest overseas stockpile, climbed by $46.6 billion in February — the most since February 2020. Standing at $1.13 trillion, holdings are at the highest level since April 2024.
China’s Treasuries holdings also climbed, by $23.5 billion to $784.3 billion. The nation sold a net $4.8 billion of longer-term U.S. government securities, but added a net $15.1 billion of short-term Treasuries. The overall gain also reflects a boost in valuations, as Treasuries climbed in February. China is the second-largest overseas holder of Treasuries, and has recently been the subject of speculation with regard to the potential for retaliatory sales in the face of Trump’s steep tariff hikes.
The UK, the third-largest foreign holder, saw its stockpile go up by $10.1 billion, to $750.3 billion. Belgium, whose holdings include Chinese custodial accounts according to market analysts, held $394.7 billion of Treasuries in February, up $17 billion from the previous month. Belgium saw net sales of both long-term and short-term Treasuries, adding up to less than $1 billion for the month.
The latest breakdown of holders illustrates the foreign appetite for U.S. debt about a month before the brunt of Trump’s expansive tariffs. In the wake of his April 2 announcement, the $29 trillion Treasuries market suffered the worst rout since 2001.
Data in coming months will be scrutinized for any signs that foreign nations are reducing their Treasury holdings outright. While the figures for foreign holdings for April won’t be due out until June, some market participants expressed skepticism over that narrative. Former Treasury Secretary Janet Yellen earlier this week said she wouldn’t expect China to engage in such action.
Over a longer-term perspective, foreign investors’ role in the Treasuries market has diminished relative to the peak reached in 2008, when they accounted for over half of the market, according to data compiled by Bloomberg. In recent months, the ratio has been about 30 per cent.
Holdings of the Cayman Islands — viewed as a popular domicile for leveraged investors such as hedge funds, — went up by $13.3 billion, to $417.8 billion. Market participants have said the recent volatility in the Treasuries market has been in part related to hedge funds unwinding a strategy known as the basis trade.
Wednesday’s figures also showed that United Arab Emirates’ holdings of Treasuries soared nearly $43 billion in the first two months of this year, and now stand at $119.9 billion — roughly double where they were in January last year.
Christopher Anstey, Bloomberg News
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