Mainland China's holdings of US Treasury bonds decreased by 18.9 billion US dollars in March, while the UK became the second largest holder of US debt.

On Friday, May 16th, Eastern Time, the U.S. Department of the Treasury released the Treasury International Capital (TIC) report, which showed a significant increase in foreign purchases of U.S. debt for the second consecutive month in March, reaching a new high. Foreign holders of U.S. debt increased their total holdings by $233.1 billion in March, reaching $9.05 trillion. This increase occurred just before recent turbulence in the U.S. debt market. The latest TIC data reflects the demand for U.S. debt among foreign investors on the eve of President Trump's announcement of large-scale tariff increases. The demand for U.S. debt has been a focus of the bond market and has become especially important since Trump initiated the large-scale tariffs. After Trump announced tariff measures in April 2nd, there was a sell-off in U.S. bonds, the U.S. dollar, and U.S. stocks, causing the U.S. Treasury market, valued at $29 trillion, to experience the most severe sell-off since 2001. The Bloomberg U.S. Dollar Spot Index fell by 1.8% in March and further dropped by nearly 4% in April. The yield on 10-year U.S. Treasury bonds fluctuated slightly in March, but rose significantly from 3.86% in March to 4.59% in April. The TIC data in the coming months will be closely watched. Though the data on U.S. debt holdings in April will not be released until June, some market participants doubt this. In the long term, the proportion of foreign investors in the U.S. Treasury market has decreased from a peak of over 50% in 2008 to around 30% in recent years, according to Bloomberg compilation data. Japan's holdings of U.S. Treasury bonds increased by $4.9 billion in March, marking the third consecutive month of increase to $1.1308 trillion. Japan has been the largest foreign holder of U.S. debt since surpassing mainland China in June 2019. Last year, Japan's changes in U.S. debt holdings were once seen as an adjustment under intervention pressure in the currency market. To stabilize the yen exchange rate, intervention requires Japan to have sufficient "ammunition," forcing the country to divest U.S. assets, including U.S. debt. For example, it was reported that in July last year, Japan intervened in the currency market with $36.6 billion. However, the yen has stabilized since then, especially since January this year, and with the yen appreciating against the dollar, the Japanese government has temporarily lost motivation to divest U.S. debt. Mainland China's holdings of U.S. Treasury bonds decreased by $18.9 billion in March, reaching $765.4 billion. From April 2022, mainland China's holdings of U.S. debt have been consistently below $1 trillion. In March, China divested $27.6 billion of long-term U.S. debt. As of February this year, mainland China was the second-largest holder of U.S. debt after Japan. The decrease in holdings in March makes mainland China the third-largest creditor of U.S. debt, with the UK taking second place. The UK increased its holdings of U.S. Treasury bonds by $29 billion in March, reaching $779.3 billion. This is the first time in over twenty years that the UK's holdings of U.S. Treasury bonds have surpassed China. Analysts widely believe that, given the changing relationship between China and the U.S. and the trend towards diversification of foreign reserve assets, China's holdings of U.S. Treasury bonds may continue to decline steadily. Future fluctuations in Chinese holdings are expected to be heavily influenced by the relationship between China and the U.S. In recent years, China has divested more U.S. debt for the needs of diversification of foreign reserve assets. Increasing the proportion of gold holdings is one way to promote diversification. Until April last year, the People's Bank of China had record-high increases in gold reserves for 18 consecutive months, after which it temporarily stopped. However, it has recently resumed gold purchases. Data released earlier this month showed that China's gold reserves totaled 73.77 million ounces at the end of April, an increase of 70,000 ounces compared to the previous month, marking the sixth consecutive month of gold reserve increases by the People's Bank of China since November 2024. The Cayman Islands, a popular registration destination for leveraged investors such as hedge funds, saw an increase of $37.5 billion in U.S. debt holdings in March, reaching $455.3 billion. Market participants say that the volatility in the U.S. Treasury market in April was partly due to hedge funds unwinding their so-called "basis trading" strategies. Canada's holdings of U.S. debt increased by $20.1 billion in March, reaching $426.2 billion. The U.S. Department of the Treasury's TIC data also shows: In March, the total net inflow of all external funds, including long-term securities, U.S. short-term securities, and bank fund flows, was $254.3 billion. Of this, private external funds had a net inflow of $259.2 billion, while official external funds had a net outflow of $4.9 billion. In March, foreign residents increased their holdings of U.S. long-term securities, with a net purchase of $183.2 billion. Foreign private investors accounted for a net purchase of $146 billion, while foreign official institutions had a net purchase of $37.3 billion. U.S. residents increased their holdings of long-term foreign securities by $21.5 billion in March. After adjustments, such as estimating foreign investment portfolios acquiring U.S. securities through stock swaps, the estimated net inflow of foreign long-term securities in March was $161.8 billion. Foreign residents increased their holdings of U.S. Treasury bills by $98.3 billion. All U.S.-dollar-denominated short-term U.S. securities and other custody liabilities held by foreign residents increased by $98.6 billion. Banks reduced their net dollar-denominated liabilities to foreign residents by $6.1 billion. The U.S. Treasury Department's TIC data for April is scheduled to be released on June 18th, 2025.