Chinese holdings fell to $1.003 trillion in April, down
$36.2 billion from $1.039 trillion in March, US Treasury Department figures
showed. China’s stock of Treasuries in May 2010 was $843.7 billion, data
showed.
The reduction in Treasury holdings may also have been aimed
at diversifying China’s foreign exchange holdings, analysts said.
The Chinese sales contributed to a drop in overall foreign
holdings of Treasuries in April that helped propel yields higher. US benchmark
10-year Treasury yields started April with a yield of 2.3895%, and surged
roughly 55 basis points to 2.9375% by the end of the month.
Japan Holdings Skid
Japan’s holdings of US Treasuries fell further in April to
their lowest since January 2020, amid a persistent decline in the yen versus
the dollar, which may have prompted Japanese investors to sell US assets to
benefit from the exchange rate.
Japanese holdings fell to $1.218 trillion in April, from
$1.232 trillion in March. Japan remained the largest non-US holder of
Treasuries.
Overall, foreign holdings of Treasuries slid to $7.455
trillion, the lowest since April 2021, from $7.613 trillion in March.
On a transaction basis, US Treasuries saw net foreign
outflows of $1.152 billion in April, from net new foreign inflows of $48.795
billion in March. This was the first outflow since October 2021.
Foreigners Tap US Corporate Bonds
The Federal Reserve, at its policy meeting in March, raised
benchmark interest rates by a quarter of a percentage point.
It lifted rates by 50 bps in May, but at the June policy
meeting on Wednesday lifted rates by a hefty 75 bps to stem a disruptive surge
in inflation. The Fed also projected a slowing economy and rising unemployment
in the months to come.
In other asset classes, foreigners sold US equities in April
amounting to $7.1 billion, from net outflows of $94.338 billion in March, the
largest since at least January 1978, when the Treasury Department started
keeping track of this data.
Foreign investors have sold stocks for four consecutive
months.
US corporate bonds, on the other hand, posted inflows in
April of $22.587 billion, from March’s $33.38 billion, the largest since March
2021. Foreigners were net buyers of US corporate bonds for four straight
months.
US residents, meanwhile, decreased their holdings of
long-term foreign securities, with net sales of $36.7 billion, data showed.