Foreign holdings of US Treasuries fall $72.1 billion in June, led by Japan and China

Foreign holdings of US Treasury securities decreased by $72.1 billion in June from May, falling to $9.299 trillion. This marked the third decline in four months and a level below the record high reached in February ^{[1, 2, 3, 4]}.

Japan, the largest foreign holder of US Treasuries, cut its holdings by about $26.4 billion in June to roughly $1.116 trillion. The reduction was mainly in short-term Treasury bills, which fell by around $23 billion, while long-term notes and bonds remained near $1.046 trillion ^{[1, 2, 3, 4, 5]}. The decrease is linked to persistent weakness in the yen and currency market intervention efforts, including a rare coordinated intervention with the US Treasury in late July to support the yen ^{[1, 4, 5]}. Pioneer Investments strategist Upadhyaya said, "Japan's move is clearly due to foreign exchange intervention. Undoubtedly, we will not see Japan sell US debt again" ^[1].

China’s holdings of US Treasuries also declined sharply, dropping about $25.9 billion in June to $633.4 billion—the lowest level since September 2008. This represented a more than 13% decline compared to a year earlier ^{[1, 2, 3, 4]}. The UK, the second largest overseas holder after Japan, reduced its holdings by about 1%, from $948.6 billion to $939.9 billion during June ^{[1, 2, 3, 4]}.

Despite the overall decline in holdings, foreign investors made net purchases of $6.8 billion in US Treasuries in June, down significantly from $56.6 billion in May. Meanwhile, they increased net purchases of US corporate bonds and equities, signaling a shift toward other US asset classes rather than a full withdrawal of capital ^{[2, 3, 4]}.

Japan’s reduced reinvestment capacity in Treasuries may increase upward pressure on yields and term premiums by dampening external demand ^[5].

In summary, the June data shows notable foreign selling pressure on US Treasuries from major holders Japan and China amid currency market moves. The next key event was the rare coordinated currency intervention between the US and Japan in late July aimed at stabilizing the yen ^{[1, 4]}.