Foreign demand for US Treasuries slips in September, but Japan steps up buying

NEW YORK – Foreign holdings of US Treasuries slipped in September, data from the Treasury Department showed on Tuesday, declining for the first time in six months.

The Treasury finally released capital flows data after the federal government’s 43-day shutdown. Data for October will be released on December 18, the Treasury said.

Holdings of US Treasuries edged lower to USD 9.249 trillion in September, slightly down from USD 9.262 trillion in August. But compared with a year earlier, Treasuries owned by foreigners were up 5.5%.

Japan remained the largest non-US holder of Treasuries with USD 1.189 trillion in September, its biggest holdings since August 2022, when their stash of US government debt hit USD 1.196 trillion. Japan’s holdings have increased for nine straight months.

China’s holdings of Treasuries, on the other hand, dipped to USD 700.5 billion in September from USD 701 billion in August. In July, its cache of Treasuries had fallen to USD 696.9 billion, the lowest since October 2008 when holdings tumbled to USD 684.1 billion.

The world’s second-largest economy is the third-largest holder of US Treasuries, behind the United Kingdom.

It has been a gradual reduction of US Treasury holdings for China over the past decade, which reflects both strategic and market-driven considerations, analysts said. Strategically, Beijing has sought to lessen its dependence on the US dollar for reserves, trade settlement, and investment purposes.

China has also been trimming its Treasury portfolio to support the yuan. Analysts noted that a slowing economy, lingering post-COVID challenges, and rising trade barriers have curbed export inflows, adding pressure on Beijing to shore up its currency.

UK investors, meanwhile, also reduced their load of Treasuries to USD 865 billion in September, down from USD 904.3 billion in August.

On a transaction basis, foreign purchases of Treasuries fell to USD 25.5 billion in September, down from USD 48.5 billion in August and USD 44.6 billion in July. In May, there were foreign inflows of USD 147.4 billion in Treasuries, the largest since August 2022.

Foreign investors, meanwhile, snapped up USD 132.9 billion in US equities in September, up from USD 89.4 billion, and a massive improvement from outflows of USD 16.2 billion seen in July.

Data also showed that the net capital inflow into the United States totaled USD 190.1 billion, higher than the USD 187.1 billion in August. In July, there was a net capital outflow of USD 6.6 billion.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Lincoln Feast)