On April 2, an exuberant Donald Trump announced that the United States was imposing tariffs on the entire world. That same month, Treasury bonds experienced weeks of historic volatility, and foreign investors sold a net total of $40.8 billion in U.S. bonds and notes with maturities longer than one year—the largest amount sold since December. The data comes from the latest Treasury report.
Part of that selloff was offset by $6.042 billion in purchases by foreign central banks, according to a Barron’s report. As a result, foreign holdings totaled over $9 trillion for the month, the second-highest amount ever recorded.
Treasury bonds went through a historic wave of selling in April, with the 30-year yield posting its biggest weekly gain since 1987, while the 10-year yield saw its largest weekly gain since the end of the 2001 recession, according to Dow Jones Market Data.
Recent estimates indicate that foreign investors hold about 30% of publicly held Treasury debt, down from nearly 50% in 2008. The U.S. public debt market is valued at $28.6 trillion. Foreign holdings have seen a near-constant increase since 2022. Japan and the United Kingdom are the largest holders, followed by China. The first two countries increased their holdings in April, while China reduced theirs.
“The safe-haven status of these assets is increasingly being questioned, and our data clearly reflects this trend,” said John Velis, macro strategist for the Americas at BNY, according to an article in Market Watch.
According to BNY data, foreign sales were recorded on eight of the last eleven trading days since April 4. The 10-year Treasury yield nearly reached 4.5% on April 11, when foreign investors exited the market, according to the same source.
Trump’s trade policy is joined by other factors explaining these movements in the U.S. bond market. According to Jay Barry, Global Rates Strategist at J.P. Morgan, hedge funds placed large leveraged bets early in the spring that were forced to unwind, which could be one reason for the wave of selling. Investors may also simply be rebalancing their portfolios, as market confidence in international assets, such as German government bonds, has improved.
