Overview
- Treasury data for March show foreign-held U.S. debt fell to $9.348 trillion, with Japan down to $1.192 trillion and China to $652.3 billion.
- Japanese investors were net sellers of about $29.6 billion in U.S. government, agency, and municipal bonds in the first quarter of 2026, and the pace picked up in February and March.
- The pullback follows the Bank of Japan cutting its monthly purchases of Japanese government bonds to about ¥2.9 trillion, which raised local yields and made domestic paper more appealing to large institutions.
- Analysts say thinner foreign demand could add 20 to 50 basis points to the U.S. 10-year yield over time, a shift that tends to lift mortgage rates and raise corporate borrowing costs.
- Banks warn of knock-on risks if bond volatility rises, with Citigroup estimating that some leveraged funds could be forced to sell as much as $130 billion of Treasuries.