Data from the U.S. Treasury Department shows that foreign holdings of U.S. Treasury securities declined in June, primarily due to reductions in holdings by Japan, the UK, and China. Total foreign holdings fell to $9.299 trillion in June from $9.371 trillion in May, but still increased by 2.3% year-on-year. Japan remains the largest holder outside the U.S., although its holdings declined by 2.3% to $1.116 trillion, well below the peak of $1.325 trillion in November 2021. Data from the U.S. Treasury Department's International Capital System shows that foreign investors net liquidated approximately $72 billion in U.S. Treasury securities in June, with Japan, China, and some custody centers being net sellers, and Canada, Belgium, and Switzerland being net buyers. Foreign net selling over the past three months totaled $56 billion, while net buying over the past 12 months totaled $205 billion. Total inflows into the U.S., including equities, remained strong in June at $173 billion. ING stated that with the 60-day U.S.-Iran ceasefire agreement expiring without a resolution, coupled with continued issuance pressure from mega-corporations, the tone of the U.S. Treasury market remains bearish and may decline further. The bank attributes the recent rise in real yields to a return to pre-financial crisis levels, rather than a genuine market misalignment. In the Eurozone, the ECB's balance sheet reduction has led to tighter liquidity, which will ultimately support a structurally bearish outlook for German government bonds.
