America's closest allies and related regions made net purchases of $174.3 billion in U.S. Treasury bonds in the first eight months of this year, a decrease of over 60% compared to the same period last year, marking the lowest level for the same period since 2021. The cooling in Asian buying was particularly pronounced: Japan's net purchases were only $389 million, a 99% year-on-year decrease; South Korea's net sales reached $23.8 billion, the largest net sale since relevant statistics began in 1977; and Taiwan also turned into a net seller. Bloomberg analysis suggests that rising U.S. policy uncertainty, a weakening yen and won, rising local bond yields, and increased attractiveness of the domestic stock market may all have prompted Asian investors to reduce their allocation to U.S. Treasuries. Buying in European markets such as the UK partially offset the weakening Asian demand, so overseas funds have not completely withdrawn from the U.S. market. However, if traditional buyers continue to decline, the Treasury may need to offer higher yields to attract more price-sensitive investors, increasing government financing costs and bond market volatility.
