Foreign investment in U.S. Treasuries fell to its lowest level since May 2021

Data from the U.S. Treasury Department showed that foreign investment in U.S. Treasuries fell in September to its minimum level since May 2021. The main reasons for the drop were Japanese and Chinese currencies, as they fought against a rising dollar all the year.

In August, offshore assets totaled $7.509 trillion. Currently, they are down to $7.296 trillion.

In August, holdings of U.S. Treasuries in Japan amounted to $1.199 trillion. In September it fell to $1.120 trillion. Japan reduced its treasury bond holdings for the third month in a row. However, it remains the largest holder of U.S. government debt outside the U.S.

Japan is protecting its currency, which has come under pressure from the Bank of Japan's ultra-soft monetary policy. This is probably the main reason for the partial decline. On the other hand, the FRS's aggressive behavior is very different in its decisiveness to repress inflation.

September intervention in the foreign exchange market to support the yen caused Japan to lose a record 2.8 trillion yen ($19.7 billion).

China is in second place, and its assets also fell. In August they were $971.8 billion, and in September they fell to $933.6 billion. China has held less than $1 trillion in U.S. Treasuries for six months in a row.

Analysts said that China's central bank may have sold treasury bonds to support its currency, following the example of the Bank of Japan. The reason for that was pressure on the yuan from the dollar, as well as on the yen.

Despite this, in September the purchase of U.S. Treasury bonds and bills by foreigners amounted to $60.4 billion. As a reminder, the August inflow was a record $175.2 billion.

In August, inflows into U.S. corporate bonds from other asset classes totaled $9.50 billion. In September, the figure was $5.52 billion. Foreigners have been net buyers of U.S. corporate bonds for nine consecutive months.