The consensus read on foreign Treasury holdings is that nervous governments are quietly exiting US debt. Foreign official Treasury selling of $70 billion in June does fit that picture, but the fuller data published by the U.S. Treasury complicates it considerably, and the part the consensus tends to skip over is the private-sector side of the ledger.
Total foreign holdings fell by $72 billion in June to $9.30 trillion. The official sector, meaning central banks and government entities, accounted for nearly all of that decline. Since February, official holders have shed $233 billion, bringing their combined holdings to $3.78 trillion, the lowest since February 2024. So far, so alarming, if you want it to be.
What undercuts the clean “foreigners are fleeing Treasuries” narrative is the other line on the chart. Foreign private-sector entities kept their holdings essentially unchanged at a record $5.52 trillion. These are entities such as US companies with offshore accounts and US hedge funds domiciled in the Cayman Islands that hold Treasuries as the base leg of the basis trade. The private sector is not fleeing. It is, if anything, sitting firmly.
Japan’s Foreign Official Treasury Selling Was Largely Tactical, Not Ideological
Japan reduced its Treasury holdings by $26 billion in June. Since February, the reduction has been $123 billion. The popular reading is that this signals eroding confidence in US debt. The more plausible read, given Japan’s behaviour in foreign exchange markets, is that it is operationally preparing for yen interventions.
Japan has attempted to prop up the yen multiple times, including a joint US-Japan intervention at the beginning of August. Each time, the mechanism is the same: sell dollars, buy yen. To have the dollars available in size and on short notice, Japan’s authorities have two main options. They can let Treasury securities mature without rolling them over, setting aside the dollar cash while preparing for the next move. Or they can unwind overnight reverse repos held at the Federal Reserve, where the Fed currently carries $358 billion in foreign official reverse repos on its balance sheet, essentially dollar deposits from foreign central banks that can be cashed out the following morning.
The pattern in Japan’s holdings bears this out. The large drops in 2022, in 2024, and again in 2026 broadly precede the big yen interventions, followed later by partial rebuilding of those positions. This is liquidity management, not a sovereign investment statement.
According to a U.S. Congress Congressional Research Service report, Japan held approximately 12.8% of all foreign investment in US publicly held federal debt as of December 2025, making it the largest single foreign holder at roughly $1.2 trillion. The United Kingdom came second at approximately $0.9 trillion, and China third at approximately $0.7 trillion. Those figures provide useful context for the June moves: even after the drawdowns, the concentration of foreign official holdings remains highly visible in a small number of countries.
China, Hong Kong and the Financial Centres: Reading the Foreign Official Treasury Selling Data Carefully
Mainland China and Hong Kong combined shed $42 billion in June and $84 billion over the trailing twelve months. The report characterises this as a “long methodical process”, which is a more accurate description than the geopolitically freighted framing it often receives in commentary elsewhere. Methodical divestment over years is different from a panicked exit.
The seven largest financial centres, the United Kingdom, the Cayman Islands, Belgium, Luxembourg, Ireland, Switzerland, and Singapore, collectively dipped by $11 billion in June from a record set in May, to $3.23 trillion. They account for roughly 35% of all foreign holdings. The Cayman Islands figure, in particular, is almost entirely US hedge funds engaged in the basis trade, which has nothing to do with foreign sovereign appetite for Treasuries. Conflating these flows with official-sector sentiment is a category error that a lot of coverage commits.
Japan, mainland China and Hong Kong, and the seven financial centres combined represent 57% of total foreign Treasury holdings. How those three groups move drives the aggregate number almost entirely. Stripping out the basis-trade-related private flows and the yen-intervention-related official flows leaves a story that is considerably less dramatic than the $72 billion headline suggests.
One factor explicitly not in play in June: market value distortion. The 10-year Treasury yield ended both May and June at 4.45%, meaning the mark-to-market effect on holdings was negligible. The June decline was real selling or non-rollover, not a valuation artefact. That matters for the integrity of the data. It does not, on its own, make the selling geopolitically motivated. The distinction is worth keeping.
Wolf Richter’s full breakdown of June Treasury data, including country-by-country changes for Canada, France, Norway, India, Brazil, Saudi Arabia, South Korea, the UAE and Israel, is available at Wolf Street.
