US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments

by Mira Azkia 18 September 2026 6 min read 507x views

US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments

But opaque abroad financial centers heap on Treasuries, frequently held by US companies and hedge funds.

By Wolf Richter for WOLF STREET.

Treasury securities have misplaced their allure for abroad chief banks and governments, whose holdings declined this twelvemonth and in July dropped to $3.77 trillion at market value, approximately anywhere they’d been in 2012, according to the Treasury Department’s TIC data.

But complete this period, since 2012, the amount of Treasury securities outstanding has concerning tripled, according to the Dallas Fed market-value data (via St. Louis Fed). And cost increase since 2012 was 48%. And the portion of these “foreign official” holdings has crumbled from a portion of 34% of marketable Treasury securities in 2012, and from a portion of complete 38% at the highest in 2007-2009, to a portion of 12.8% in July, the lowest portion since 1993.

There are three aspects to this:

Treasury securities have rotate into increasingly unappetizing for abroad chief banks and governments.
The US has rotate into a lot small reliant on abroad chief banks and governments to backing its enormous out-of-control deficits.
The US has rotate into additional reliant on opaque abroad financial centers, anywhere US hedge finances and companies keep their holdings.

Foreign holders in total – abroad authoritative holders and abroad personal holders – shed $50 milliard of Treasury securities in July, bringing their holdings downward to $9.25 trillion (red in the diagram below). Those total holdings kept zigzagging higher complete the years and reached a highest in February, driven by personal abroad holdings.

Long-term Treasury notes and bonds accounted for $7.78 trillion, or concerning 84%, of the total abroad holdings (blue line). The remainder were short-term Treasury bills.

But these personal abroad holdings are not purely “foreign.” They contain ample amounts from US hedge finances that are living in abroad financial centers, specified as the Cayman Islands, a big favorite for hedge finances busy in the extremely leveraged Treasury basis commerce that buy Treasuries, estimated at near to $2 trillion, and market Treasury futures against them. This is the hot prosperity in Treasuries, and rear in March 2020, it caused the Treasury market to seize, an event that the Fed keeps nervously talking about. Only now, it’s a lot bigger.

And they contain holdings by US companies that have entities in Ireland and elsewhere anywhere they keep their abroad profits, alternatively of repatriating them to the US and paying earnings taxes on them in the US. Apple became a poster boy of that during a Senate inquiry in 2013. US Big Pharma has set up in Ireland for these reasons. And those Treasuries are included in “foreign private” holdings since the entities that clasp them are registered in abroad countries.

But their portion of marketable Treasury securities outstanding declined to a near-record low in July of 31.9%, approximately matching three months in 2020, whenever the US authorities had issued concerning $3 trillion in new debt in three months, and the Fed had bought $3 trillion in three months.

Japan dumped Treasury holdings, shedding $13 milliard in July. From February through July, Japan reduced its Treasury holdings by $135 billion.

Japan is trying to put a flat under the collapsing yen and had busy in multiple rounds of prosperity market interventions, marketing dollars and purchasing yen. It sold Treasury securities ongoing of the involvement to get the dollars and to market them in the prosperity market and buy yen.

These revenue are hugely profitable in yen-terms for the Japanese authorities since it purchased the securities alongside much stronger yen years ago, and now gets many additional yen from the proceeds because of the yen’s plunge against the dollar. As many of the sold securities were near to their maturity dates, and hence brought near to visage value, the losses in dollar conditions because of higher yields were minimal. There are community discussions underway in Japan concerning what to do alongside these profits from the Treasury trade. Spend them is part of the answer. Don’t cry for Japan.

Mainland China and Hong Kong blended have been relentlessly dumping their Treasury holdings since 2015, and that continued in July, whenever they shed $13 billion, bringing the 12-month total decrease to $67 billion.

Since the highest in 2015, they have shed $587 billion. And their portion has dropped to an inconsequential 3.0% of the marketable Treasury securities outstanding.

Opaque financial centers rule. Treasury holdings in the seven largest financial centers blended rosy to $3.28 trillion. Those seven document for concerning 11% of all marketable Treasury securities outstanding, and concerning 35% of all abroad holdings!

In command of the dimension of their holdings:

United Kingdom ($1.0 trillion), really the City of London, the largest financial center in the world;
Belgium ($471 billion), residence of Euroclear;
Cayman Islands ($460 billion) anywhere US hedge finances are domiciled;
Luxembourg ($442 billion);
Ireland ($350 billion);
Switzerland ($285 billion);
Singapore ($278 billion).

Canada’s Treasury yoyo: In July, its holdings plunged by $33 milliard to $426 billion, undoing additional than the spike in the previous month. The elevated was in September 2025 ($476 billion).

The latest enormous yoyo makes me think that we’re looking at data gathering noise, and not at several funding choices Canadians are making.

France’s holdings plunged in July by $42 milliard from document levels, to $348 billion. The French banking scheme additionally has characteristics of financial centers.

Taiwan’s holdings fell by $6 milliard in July, to $296 billion:

Norway’s holdings rosy by $4 milliard in July, to $207 billion, following four months of declines, and was basically unchanged from a twelvemonth ago.

The small nation is residence to the world’s largest sovereign prosperity fund, the Government Pension Fund Global, additionally known as the Oil Fund, which has $2.3 trillion in resources under management, including Treasuries.

The prosperity director has now projected to decrease its association holdings in general, and most of the reductions would hit its Treasury holdings, which could be cut by concerning $80 billion. So we’ll see if that happens.