According to data released by the U.S. Department of the Treasury in mid-August, foreign holdings of U.S. Treasury securities reached a record high in June this year, surpassing USD 9 trillion for the fourth consecutive month. Foreign holdings of U.S. Treasury bonds increased from USD 9.05 trillion in May to USD 9.13 trillion in June, a 0.9% month-on-month rise. Compared to the same period last year, foreign holdings of U.S. debt grew by nearly USD 1 trillion, a 10% increase. At the same time, foreign investors also poured into U.S. stocks, purchasing USD 163.1 billion in June, following USD 115.8 billion in purchases in May.
The data also showed that in June, the total net capital inflow into the U.S. was only USD 77.8 billion, a 75% drop from the revised USD 318.1 billion in May. This marks the largest decrease since September 2024 and the second-lowest month for capital inflows into the U.S. since August 2022. In April this year, due to the impact of President Donald Trump's tariff policies on the market, there was a net outflow of USD 40.8 billion from the U.S. Based on the capital flow trends in June, the decrease in net inflows into the U.S. was primarily because some U.S. capital flowed into the stock markets of Japan and Europe.
Analysts noted that, when it comes to the main factors affecting U.S. Treasury bond holdings, Japan remains the largest foreign holder of U.S. debt. The latest Treasury statistics show that Japan's holdings of U.S. Treasury securities reached a record high of USD 1.147 trillion in June, up by USD 12.6 billion from USD 1.134 trillion in May. Japanese capital purchases U.S. Treasury bonds primarily because Japanese companies have substantial investments in the U.S. Not only does Japan run a trade surplus with the U.S., but the returns on Japanese investments in the U.S. also exceed the returns on U.S. investments in Japan. According to international practice, surplus countries typically use the surplus obtained from deficit countries in international payments to purchase the deficit country's bonds or reinvest in that country, in order to maintain a balance in their respective international payments.
At the same time, the UK's holdings of U.S. Treasury securities have also continued to rise. This year, the UK officially surpassed China in terms of U.S. debt holdings. In June, the UK held USD 858.1 billion in U.S. Treasury bonds, a 0.6% month-on-month increase from USD 809.4 billion in May, setting a new historical record. Analysts noted that the main reason for the UK's significant holdings of U.S. Treasury bonds is its role as a global financial custodian, rather than domestic demand for funds. As an international financial hub, London provides advanced custodial services, with many hedge funds, institutional investors, and banks holding U.S. debt through custodial accounts in the UK. After Trump's return to the White House, global uncertainties such as the trade war and changes in Federal Reserve monetary policy pushed investors toward U.S. Treasury bonds as a safe-haven investment. This demand often flows through UK channels, further increasing the UK's holdings of U.S. debt and enhancing its influence in global bond markets.
Additionally, under the influence of multiple factors, China's holdings of U.S. Treasury bonds have continued to decline. In June, China's holdings stood at USD 756.4 billion, essentially unchanged from USD 756.3 billion in May, but down about 3.1% year-on-year. This marks the lowest level since February 2009, far below the holdings during the 2012-2016 period, which exceeded $1.3 trillion. As the world's second-largest economy, China has been gradually reducing its holdings of U.S. Treasury bonds.
In December 2012, foreign major creditors held a total of USD 5.56 trillion in U.S. Treasury securities, with China holding USD 1.2 trillion, accounting for 21.6% of the total, and 36.2% of China's foreign exchange reserves. By June 2025, the amount of U.S. debt held by foreigners had increased to USD 9.13 trillion, an increase of more than 60%. However, China's holdings had decreased by 34.8% to USD 756.4 billion. China's share of total foreign holdings dropped from 21.6% in 2012 to 8.3%, and its share of foreign exchange reserves decreased from 36.2% to 22.8%. Over the past decade, China's continued reduction in U.S. Treasury bond holdings has been driven by multiple factors, mainly including economic strategy adjustments, geopolitical tensions, economic slowdown, and currency management needs.
After Trump introduced a series of highly impactful tariff policies this year, many media outlets suggested that his tariff policies would trigger capital outflows from the U.S. and market turmoil. However, data from the U.S. Treasury clearly shows that this view is open to debate. In terms of the continued increase in foreign investment in U.S. Treasury bonds, analysts believe the main reasons are as follows.
First, the high safety attributes of U.S. Treasury bonds: Trump's "Liberation Day" tariffs led to stock market volatility and economic uncertainty, prompting investors to turn to Treasuries as a safe-haven investment. After the tariff announcement in April, the stock market plunged, but demand for U.S. Treasury bonds surged, driving up holdings. Bond market experts point out that the tariff uncertainty actually increased the appeal of U.S. Treasury bonds, as they offer low-risk returns, which is clearly different from stocks or commodities that are more susceptible to trade tensions.
Second, the diversification of U.S. debt holders has offset the decrease in China's holdings. Analysts note that while China's holdings have dropped to a historical low, other countries' reserve strategies are different from China's. Although U.S.-China trade friction has prompted the People's Bank of China to adopt some de-dollarization measures, China's exit from the U.S. Treasury market has instead created opportunities for other countries to expand their presence. As a result, the gap left by China's reduction in U.S. debt holdings has quickly been filled by other countries. Japan, the UK, EU countries, and offshore centers like the Cayman Islands have all been increasing their holdings of U.S. Treasuries.
Third, macroeconomic factors support the demand for U.S. Treasuries. The U.S. economy is relatively strong, although there is significant disagreement in predictions, which could lead to misjudgments. At the same time, the Federal Reserve's policy shift towards neutrality, with potential expectations of rate cuts, has enhanced the attractiveness of Treasury yields. Global risk behavior shows that, while the trade war suppresses economic growth, it has stimulated the accumulation of U.S. dollar assets. Media coverage of capital outflows mainly focuses on stock market fund movements, whereas the bond market benefits from reallocation. Relevant analysts believe that, overall, foreign holdings of U.S. Treasuries continue to grow, highlighting the resilience of U.S. financial hegemony, the attractiveness of U.S. Treasuries as a risk-free benchmark, and positive expectations for the U.S. macroeconomy.
Regarding the latest data on U.S. Treasuries, some believe that the main contributors to the current "lifeline" of U.S. government debt are primarily its traditional Western allies and strategic partner countries. Their increased holdings are driven not only by economic considerations but also by an implicit geopolitical understanding. However, emerging markets are steadily reducing their holdings, suggesting that the U.S. Treasury market is transforming from "global public goods" into an "allies-only club". As a result, its stability will increasingly depend on the political alignment of a few countries or regions, rather than on market rationality. In the long run, this alliance-based debt financing model could heighten the risk of bloc formation in the global financial system and increase global financial instability. On this matter, researchers at ANBOUND are of the opinion that emerging countries, especially the BRICS nations, are indeed consistently reducing their U.S. Treasury holdings. The core reasons include sanctions risk, the need for reserve diversification, exchange rate stability, and yield considerations. However, this does not amount to a wholesale rejection of the U.S. dollar. Rather, it is a gradual process of risk diversification. U.S. Treasuries remain a key component of these countries' foreign exchange reserves. Their reductions in holdings have not fundamentally altered the "public goods" nature of U.S. Treasuries.
Final analysis conclusion:
In the face of rising tariffs and increasing geopolitical uncertainty, the safe haven appeal, strong liquidity, and benchmark characteristics of U.S. Treasuries continue to support their global attractiveness. Capital inflows from key U.S. allies have further reinforced the fundamentals of the Treasury market, clearly reflecting the resilience of American financial dominance. If the U.S. economy continues to improve, this trend is expected to continue.
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Zhou Chao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.
