According to a report by the U.S. Treasury, overseas holdings of U.S. Treasuries fell by $50.4 billion month-on-month in July. Japan, the United States' largest creditor, reduced its holdings by $12.8 billion, marking the third consecutive monthly decline and reaching a more than one-year low. China, the third-largest holder, cut its U.S. Treasury holdings by $15.4 billion, declining for the second straight month. Meanwhile, the United Kingdom, the second-largest holder, bucked the trend by increasing its holdings by $58.4 billion, pushing its total to a new high since May. In July, France and Canada posted the largest declines, with their holdings falling by $41.5 billion and $30 billion, respectively.
According to official U.S. data, in July of this year, overseas investors' holdings of U.S. Treasury securities fell to a nine-month low—coinciding precisely with Japan, the United States' largest foreign creditor, intervening in the foreign-exchange market to support the yen.
According to the U.S. Treasury's International Capital Flows (TIC) report released on Wednesday, September 16, Eastern Time, overseas investors' holdings of U.S. Treasury securities declined for the second consecutive month in July, falling by $50.4 billion from June to $9.25 trillion—the lowest level since October 2025.
The TIC report indicates that declines in French and Canadian holdings were the primary drivers behind the July drop in overseas U.S. Treasury securities positions. Japan and mainland China also continued to reduce their holdings. Meanwhile, at the end of July, Japan coordinated with the United States to intervene in the foreign-exchange market by purchasing yen, prompting renewed market attention: as Japan draws on its foreign-exchange reserves to support its currency, could this further alter its allocation to U.S. Treasuries and place additional pressure on the U.S. government bond market?
Japan's holdings of U.S. Treasury bonds have declined for three consecutive months, hitting a more than one-year low.
According to the TIC report, Japan's holdings of U.S. Treasury securities fell by $12.8 billion month-on-month in July, dropping to $1.1039 trillion—marking a two-month streak of record lows since January 2025—though its total holdings still rank first among foreign countries and regions. As of July, Japan's U.S. Treasury holdings have declined for three consecutive months.
Japan is the largest foreign holder of U.S. Treasury securities, and the link between its foreign‑exchange reserves allocation and the U.S. Treasury market has long been a focus of market attention. In recent months, Japan's reduction in its holdings of U.S. Treasuries has coincided in timing with its currency‑market interventions.
Data released by Japan's Ministry of Finance on May 29 showed that, between April 28 and May 27, the total value of Japan's foreign-exchange market interventions reached 11.73 trillion yen. Analysts believe that such yen-buying operations are likely to involve the sale of U.S. Treasury securities on a substantial scale.
On August 3, Japan's Ministry of Finance confirmed that the Japanese government and the U.S. Treasury Department coordinated a yen‑buying intervention on July 31 to curb the currency's recent sharp volatility. This marks the first joint FX market intervention by Japan and the United States since the 2011 Great East Japan Earthquake, and it is an exceptionally rare coordinated move outside of extraordinary circumstances such as financial crises.
According to data released by Japan's Ministry of Finance on August 29, the Japanese government intervened in the foreign-exchange market with a total outlay of approximately 15.4 trillion yen between July 30 and August 26, marking a record high for such interventions.
Intervening in the foreign-exchange market requires Japan to sell foreign currency and buy yen. Given that Japan's foreign reserves include a substantial amount of U.S. Treasury bonds, markets are closely watching whether Japan will finance such intervention by selling dollar‑denominated assets, including U.S. Treasuries.
However, it should be noted that the TIC report tracks changes in outstanding positions, which encompass both actual trades and fluctuations in bond valuations. Consequently, one cannot rely solely on this report to determine how much U.S. Treasury debt Japan has sold in currency‑market interventions.
China simultaneously reduced its holdings, while the UK bucked the trend by increasing its stakes by $58.4 billion, reaching a new high.
According to the TIC report, in addition to Japan, China—the United States' other major creditor—continued to reduce its holdings in July as well.
In July, mainland China reduced its holdings of U.S. Treasury securities by $15.4 billion month-on-month, bringing its total to $618 billion—the lowest level in 18 years since 2008. This marks the second consecutive monthly decline and the ninth month of reductions over the past 11 months, with its overall holdings remaining in third place.
The United Kingdom, the second-largest foreign holder of U.S. debt, has followed the opposite trend. In July, its holdings increased by $58.4 billion, bringing its total to $998.3 billion and setting a new record—surpassing the previous high reached in May. Since overtaking China in March 2025 for the first time in more than two decades, the UK has consistently ranked second in U.S. Treasury holdings. Following a decline in June, its July increase marked a rebound, with the UK now boosting its position for the sixth consecutive month over the past seven months.
Among the top ten foreign holders of U.S. Treasury securities reported by the TIC, only the United Kingdom, Luxembourg, and the Cayman Islands increased their holdings in July, with the UK posting the largest rise—$7.9 billion—followed by Luxembourg and the Cayman Islands, which added $7.0 billion and $7.0 billion, respectively. The two largest declines were recorded by France, ranked ninth in total holdings, and Canada, ranked seventh, with their positions falling by $41.5 billion and $33.3 billion, respectively, on a month-over-month basis.
Belgium, which ranks fourth in total holdings, reduced its July position by $11.8 billion, bringing its holdings down to $470.7 billion. Market analysts note that Belgium's holdings may include custodial accounts for countries such as China, so changes in its position should not be interpreted simply as transactions by Belgian investors themselves.
Overall, the decline in overseas holdings of U.S. Treasury securities in July was not driven by Japan alone. Reductions in holdings by countries such as France and Canada, along with changes in bond prices, also contributed to the overall contraction.
Overseas holdings of U.S. Treasury bonds have continued to decline, while the market remains focused on inflation and the fiscal deficit.
Overall, the size of U.S. Treasury holdings by foreign investors has declined from its year-to-date peak.
According to the U.S. Treasury's June TIC report released earlier, overseas investors' holdings of U.S. Treasury securities fell by $72.1 billion month over month, dropping to approximately $9.3 trillion—the largest monthly decline since March. In May, foreign holdings had reached about $9.37 trillion, second only to the record high of roughly $9.49 trillion recorded in February.
In July, overseas holdings fell by another $50.4 billion, dropping to $9.25 trillion and moving further away from the year's peak.
Bloomberg reported that the Bloomberg U.S. Treasury Index fell by more than 1% in July, as investors worried that a war with Iran would exacerbate inflation risks while remaining concerned about the U.S. fiscal deficit.
A decline in overseas investors' holdings may signal mounting pressure on U.S. Treasury demand, but the outstanding balance of holdings does not directly reflect the scale of net sales. Particularly when bond prices fall, even if investors do not engage in large-scale selling, the market value of their holdings can still shrink.
For the U.S. Treasury market, the potential pressure on asset sales stemming from Japan's currency‑market interventions is intertwined with the U.S. fiscal deficit, inflation risks, and shifts in overseas demand. Going forward, it will be worth watching not only whether Japan's holdings of U.S. Treasuries continue to decline, but also how Japan plans to finance its future foreign‑exchange interventions and whether other major overseas holders are making sustained adjustments to their allocations.
Editor/stephen