Japan, China cut US Treasury holdings to multi-year low -data Reuters


© Reuters. The US dollar banknotes seen in this illustration were taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration


By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Japan and China reduced their holdings of U.S. Treasuries in May to their lowest levels in years, data from the U.S. Treasury Department showed on Monday.

Japan’s holdings fell to $1.212 trillion, the lowest since January 2020, when the country’s Treasury was $1.211 trillion. In April, Japan’s holdings stood at $1.218 trillion.

China’s U.S. government debt stockpile fell to $980.8 billion in May, the data showed, remaining the lowest level since May 2010 when the country’s debt holdings stood at $843.7 billion. USD. In April, China had $1.003 trillion in Treasury.

The world’s second-largest economy has reduced its Treasury holdings for the sixth straight month.

Although China and Japan sold Treasuries in May, US Treasury yields fell. The benchmark started May at 2.996%, falling about 15 basis points to 2.844% by the end of the month.

Overall, offshore Treasury holdings fell to $7.421 trillion in May, the lowest level since May 2021, from $7.455 trillion in April.

“It’s been another month of selling by foreign investors. But it looks like selling is starting to slow because it’s been a bit off,” said Gennadiy Goldberg, senior interest rate strategist at TD Securities in New York. in May, the rate hike has softened a bit.”

“Japan and China are selling, really a continuation of recent trends. We have another month of sales from Japan, but if you look at the pace, there is definitely a deceleration. No nothing like we saw in March at the end of Japan’s fiscal year.”

On a transaction basis, US Treasuries saw a net foreign capital outflow of $99.84 billion in May, the largest since March 2021, from an outflow of $1.153 billion in April.

The Federal Reserve raised its benchmark interest rate by 50 basis points in May and in June raised it by 75 basis points to curb sharp inflation.

Investors have priced in another 75 basis point rate hike at the Fed’s meeting later this month.

In other asset classes, foreigners sold US stocks in May for the fifth consecutive month for $9.15 billion, from outflows of $7.04 billion in April. Prices have dropped nearly 20% since the start of the year.

US corporate bonds announced inflows in May of $4.46 billion, compared with last month’s inflows of $22.5 billion. Foreigners have been net buyers of US corporate bonds for 5 consecutive months.

The data also showed that Americans once again reduced their long-term holdings of foreign securities, with net sales of $22.8 billion in May from sales of $36.7 billion in April.

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