Foreign Holdings of U.S. Treasuries Reach Record High

(Reuters) – Foreign holdings of U.S. Treasuries rose to a record high in July, while Japan’s U.S. government bond assets fell to their lowest since October, according to data from the Treasury Department released on Wednesday.

Key Figures

• Total U.S. Treasuries Holdings: Increased to $8.339 trillion in July from $8.211 trillion in June.
• Japan’s Treasuries Holdings: Decreased to $1.116 trillion from $1.118 trillion the previous month. Despite the decline, Japan remains the largest foreign holder of U.S. Treasury securities.
• China’s Holdings: Reduced to $776.5 billion from $780.2 billion in June, making it the second-largest holder.

Market Impact

Market participants have closely monitored Japan’s Treasury holdings due to the country’s recent interventions aimed at supporting the yen. Japanese authorities intervened to sell dollars and buy yen in late April, May, and July, likely financed by selling part of Japan’s U.S. government debt portfolio.

At the end of July, official data indicated that Japanese authorities spent 5.53 trillion yen intervening in the foreign exchange market in an effort to stabilize the yen, which had reached 38-year lows.

Additionally, Treasury yields fell in July as traders anticipated a potential interest rate cut by the Federal Reserve. On Wednesday, the U.S. central bank cut rates by half a percentage point – its first reduction since 2020 – and signaled possible further cuts.