Japan surpasses China as largest non-US holder of US treasuries

The US Department of Treasury. (Reuters pic)

NEW YORK: Japan overtook China as the largest nonUS holder of Treasuries in June, after raising its holdings to a nearly three-year high, according to US Treasury department data released on Thursday.

Japan‘s holdings of US Treasuries rose to US$1.122 trillion in June, from US$1.101 trillion in May, and were its largest since October 2016.

It was not the first time that Japan supplanted China as the largest nonUS Treasury holder. From January to May 2017, Japan held more Treasuries than China, data showed.

“The generally low- and negative-yielding sovereign debt market make Treasuries comparatively more attractive than European and Japanese debt,” said Benjamin Jeffery, rates strategist at BMO Capital Markets in New York. The steepening of the yield curve, characterised when rates on long-term bonds are higher than short-term notes, in June made currency hedging costs “a bit less onerous for foreign buyers,” he added.

China was the second largest owner of US Treasuries with US$1.112 trillion in June, compared with $1.110 trillion the previous month.

Overall, major foreign holders of Treasuries had US$6.636 trillion of US government debt in June, up from US$6.539 trillion in May, suggesting continued demand for the safe-haven asset.

Foreign flows of US Treasuries showed an outflow of US$7.71 billion in June, from net selling of US$32.785 billion in May. Foreign official institutions sold US$14.605 billion during the month, compared with outflows from the same group totalling US$21.998 billion in May.

Offshore private investors purchased Treasuries amounting to US$7.071 billion in June.

Data also showed that after 13 straight months of selling, foreigners finally bought US stocks in June to the tune of US$26.589 billion, after outflows of US$1.445 billion in May.

Foreigners also bought US$99.1 billion in net long-term securities in April, after buying US$4.6 billion in May, the report showed.