Japan, China cut holdings of U.S. Treasuries to multi-year lows -data

The U.S. Japan and China reduced their holdings of US Treasuries to multi-year lows in May, according to statistics released by the US Treasury Department.

Japan’s holdings have fallen to $1.212 trillion, the lowest level since January 2020, when the country’s Treasury holdings were $1.211 trillion. Japan’s assets were valued at $1.218 trillion in April, according to Reuters.

China’s holdings of US government debt fell to $980.8 billion in May, the lowest since May 2010, when they were at $843.7 billion, according to statistics. China held $1.003 trillion in Treasuries in April.

For the sixth month in a row, the world’s second largest economy has cut its holdings of Treasuries.

Despite the fact that China and Japan sold Treasuries in May, US Treasury rates fell. The benchmark 10-year Treasury yield began May at 2.996 percent and fell approximately 15 basis points by the end of the month to 2.844 percent.

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

“Foreign investors are selling again this month. However, it appears that the selling is slowing because the rise in interest rates fell little in May “TD Securities’ senior rates analyst, Gennadiy Goldberg, said in New York.

“Japan and China were selling, which is consistent with previous patterns. We received another month of sales from Japan, although there was a noticeable slowdown in the pace. Nothing like what we witnessed at the conclusion of Japan’s fiscal year in March.”

On a transactional basis, net foreign inflows into US Treasuries totaled $99.84 billion in May, the most since March 2021, compared to outflows of $1.153 billion in April.

To combat stubbornly high inflation, the Federal Reserve boosted benchmark interest rates by 50 basis points in May and 75 basis points in June.

Investors are expecting another 75 basis point rate increase at the Fed meeting later this month.

Foreigners sold U.S. shares for the fifth consecutive month in May, totaling $9.15 billion, up from $7.04 billion in April. Since the beginning of the year, the S&P 500 has fallen about 20%.

In May, US corporate bonds received $4.46 billion in inflows, compared to $22.5 billion the previous month. Foreigners have been net buyers of US corporate bonds for five months in a row.

The statistics also revealed that US residents lowered their holdings of long-term foreign securities, with net sales of $22.8 billion in May, down from $36.7 billion in April.