Foreign Demand for U.S. Treasuries: Facts vs. Fears

The data behind foreign demand for U.S. Treasuries challenges the “Sell America” narrative.

Amid heightened uncertainty from escalating U.S. tariffs and an intensifying trade war, the “Sell America” narrative has gained traction among investors and commentators. Headlines have warned of dwindling foreign demand for U.S. assets, particularly Treasuries. However, a closer look at the underlying data reveals a more nuanced story.

Big Picture: Foreign Ownership of U.S. Treasuries

Since 2013, foreign investors allocated an estimated $12.3 trillion to U.S. assets.¹ Foreign demand for long-dated U.S. Treasuries has been particularly strong over that time period, bolstered by comparatively high nominal yields amid persistently low and negative interest rates in Europe and Japan.

As a result of this strong demand, foreign investors now hold a substantial share of U.S. Treasuries, accounting for 30% of the total outstanding.

Current headlines are suggesting that foreign investors are drastically cutting their exposure to U.S. Treasuries, with some going as far to say that foreign governments, including China and Japan, are selling U.S. assets as a form of retaliation in ongoing trade policy negotiations. But a closer look at the data reveals that’s not the case.

Reports of the “Death of American Exceptionalism” Are Exaggerated

In 1Q25 data, there was no evidence of the “Sell America” trade in fixed income. At a high level, foreign investors added or saw market appreciation in U.S. fixed income assets.

Of course, “Liberation Day” occurred after quarter end so this data doesn’t exactly debunk the notion of foreign governments selling Treasuries in response to shifting U.S. trade policy. For a more current snapshot, the Federal Reserve publishes weekly data on foreign official holdings of Treasuries held in its custody. On January 1, 2025, the Securities in Custody for Foreign and International Accounts was $3.26 trillion. On June 11, 2025, it was $3.22 trillion.²

In addition, as we recently noted, two weeks after Liberation Day on April 2, indirect bidders (a proxy for foreign investors) bought nearly 88% of the issuance at the 10-year Treasury auction in mid-April, the highest share on record.

This data supports our view that reports of the death of “American exceptionalism” are exaggerated and we continue to believe that recent market behavior reflects cyclical rebalancing rather than a structural long-term change.

That said, while we believe American exceptionalism remains intact over the long term, it is reasonable to expect that some global capital will be retained in local markets as opportunities abroad become more attractive. As a result, the U.S. may increasingly need to compete for capital at the margin.

The Market Looks Past the Fed Meeting to July 4

As we recently discussed, there has been a broader recalibration by market participants where fiscal policy is increasingly supplanting monetary policy as the key driver of capital flows and market sentiment. For the first time in decades, many governments are turning to fiscal policy as their primary tool, contributing to rising long-term yields globally.

As a result, volatility in U.S. Treasuries is increasingly being driven not by Fed policy changes, but by perceptions of fiscal sustainability and Treasury supply. A prime example of this is the market’s reaction to last week’s Fed meeting. For much of the past two decades, the market treated Fed policy meetings like a primetime event. The ability to “interpret Fed speak” became a full-time job for some media pundits. However, the Fed meeting on June 18 came and went with little fanfare (or market reaction).

Instead, as we highlighted last week, all eyes remain on the July 4 deadline, when U.S. Treasury Secretary Scott Bessent is expected to finalize the administration’s tax and spending bill.

Note: This piece was completed on June 20, 2025, prior to the U.S. strikes on Iran.