Foreigners boost US Treasury holdings to record highs in February

NEW YORK, April 15 (Reuters) - Foreign holdings of Treasuries climbed to a ​record high in February, data showed on Wednesday, rising for a second month ‌in a sign of strong appetite for U.S. debt even as markets reassess the outlook for the Federal Reserve's interest rate policy.

 

Holdings by foreigners rose to $9.49 trillion in February, up 2.1% from $9.29 trillion in ​the previous month, data from the Treasury Department showed.

 

Compared with a year earlier, Treasuries owned ​by foreigners were up 6.6%, reflecting both falling yields early this year ⁠and the relative attractiveness of U.S. returns compared with other developed markets.

 

The increase was ​led by Japan and the United Kingdom, the two largest foreign holders of U.S. government debt.

 

Japan ​remained the biggest non-U.S. holder of Treasuries with holdings rising to $1.239 trillion in February, its largest since February 2022 when its stash peaked at $1.303 trillion.

 

Japan's holdings have advanced in 13 of the last 14 months, ​reflecting steady demand from its institutions seeking higher yields overseas as local rates remain ​low, with the Bank of Japan still trying to edge away from ultra-loose policy.

 

Analysts say Japanese demand has ‌also ⁠been supported by improved currency-hedged returns.

 

The UK, the second-largest owner of Treasuries, also raised its holdings to $897.3 billion, up 2% from January. The UK is widely viewed as a major custody hub for global investors and flows there are often seen as a proxy for hedge ​fund positioning.

 

China, the third-biggest ​foreign holder of ⁠Treasuries, slightly pared holdings to $693.3 billion in February. China's stock of Treasuries has declined by 9% since January 2025, part of a longer-term ​trend of diversification away from U.S. assets amid geopolitical tensions and ​efforts to ⁠deploy reserves into other currencies and investments.

February's increase in foreign demand coincided with a decline in benchmark 10-year Treasury yields over the month from around 4.277% to 3.962%.

 

Overall, the data showed net ⁠capital ​inflows of $184.5 billion in February, after posting preliminary net ​outflows of $25 billion in January.

 

Monthly net capital flows could remain volatile, reflecting the fallout on market sentiment from the ​U.S.-Israeli war with Iran, which began on February 28.