Treasury Demand Isn’t Dead: It’s Breaking Records

Treasury Demand Isn’t Dead: It’s Breaking Records

• Headlines warned of a foreign exodus from U.S. bonds this spring.
• April was the lone dip, and every other month showed gains.
• Today, foreign holdings of Treasurys are pushing record highs.

The demise of U.S. Treasury demand may be overly exaggerated…

One of the hardest things to do when investing is separate the signal from the noise. And in today’s environment, that task has become even tougher. Traditional media outlets are losing their audience. According to Nielsen Ratings, broadcast networks accounted for just 18.5% of all television viewing in June, a record low. Cable networks dropped to 22.5%, down from more than 50% a decade ago. Print media is facing the same trend.

These outlets are losing ground to streaming services, social media, and short-form video. That means traditional sources are now fighting over a shrinking pie. During the pandemic, they learned that fear—and the hint of calamity—grabs attention. So, they’ve filled the airwaves with sensational headlines designed to stir emotion and drive clicks. As a result, the noise in the investing arena has only grown louder.

A recent example: the supposed collapse of international demand for U.S. Treasurys. Back in April, when the White House introduced its initial tariff plan, the 10-Year yield jumped from 3.9% to 4.5%. Headlines screamed that foreign investors were dumping U.S. debt for good, chasing better, more stable prospects elsewhere. By mid-May, yields hit 4.6%…

But here’s the thing… when the story shifts, the noise rarely follows. Whether it’s fear of looking soft or a belief that optimism doesn’t engage, media outlets often skip the follow-up. And that can leave investors chasing ghosts.

Well, based on recent data from the U.S. Treasury Department, the narrative has changed. Over the past couple of months, foreign holdings have surged to new records. And if domestic rate cuts and global political turmoil persist, they’ll likely drive even more demand for U.S. Treasurys.

But don’t take my word for it, let’s look at what the data’s telling us…

U.S. Treasurys are considered one of the safest investments on the planet. They’re highly liquid, and our government has a long history of honoring its debts. So, they can be sold quickly to raise cash and still provide a reliable source of income. In addition, the U.S. dollar is the world’s primary reserve currency, meaning many global transactions are done in dollars. That creates a constant need for foreign entities to hold dollar-denominated assets, like U.S. debt.

The easiest way to track foreign investment in U.S. debt is through Treasury International Capital (“TIC”) data. It offers a monthly snapshot of overseas appetite for Treasurys, stocks, and corporate bonds. It’s one of the few tools that lets investors see who’s buying and selling America’s debt. Headlines focus on yields and politics, but TIC data reveals the deeper story behind global capital flows. It’s a way to separate the emotional narrative from reality.

The chart below shows the flow of foreign dollars into U.S. Treasury securities from April 1970 through July 2025 (the most recent data). As you can see, the figures have climbed to a new high of almost $9.2 trillion…

When the first tariff headlines hit in April, dire predictions stoked fears that foreign countries would either stop doing business with the U.S. or scale back their transactions. European Central Bank President Christine Lagarde even suggested the EU should use the moment to push for euro dominance. If that were the case, foreign governments might have less interest in owning U.S. debt. Hence the selloff in bonds and the jump in yields.

But not long after, the tone started to shift…

Investors sent a clear message: alienating allies and trading partners could do lasting damage to the U.S. economy. Both the stock and bond markets dropped, and officials took notice. The messaging around tariffs softened. Domestic markets began to rebound. Negotiations with trade partners resumed. By early summer, framework deals were announced, and most of the spring losses were erased.

Still, the narrative hadn’t caught up. Financial news outlets like Bloomberg and CNBC were still talking about foreign dollars pulling out of the U.S. Yet the data from the past year tells a different story…

The chart shows that foreign investors did sell down their Treasury holdings in April. But that wasn’t the first time. The same thing happened last fall—with far less drama. And ever since the brief pullback earlier this year, money has been flowing back into Treasurys. Total holdings hit new highs in June and July.

There are two catalysts likely driving that move…

The first is the Federal Reserve. In late 2024, policymakers signaled the Fed could cut interest rates by 100 basis points in 2025. Then came a winter inflation rebound and the tariff rollout. The Fed hit pause and bond yields spiked.

But as summer wore on, economic data pointed to slowing employment. Fed officials, including Chairman Jerome Powell, began to worry about the fallout from a weakening labor market. By September, they followed through with a 25-basis point rate cut and signaled two more could come before year-end. Bond yields dropped again.

The second catalyst is political turmoil abroad. Since spring, several major economies have faced upheaval. France has had to form its fourth government in two years. Japan’s ruling party lost its parliamentary majority and is appointing its third prime minister in just over a year. Canada’s prime minister resigned amid waning confidence. And Germany’s newly appointed chancellor is under pressure as economic stagnation and rising political fragmentation strain his coalition.

To institutional investors, U.S. politics may look messy, but they’re seeing similar issues elsewhere. They view the current administration’s trade strategy as more measured. And traditional partners are still willing to do business.

At the end of the day, don’t get caught up in the noise. Instead, focus on the signal. Foreign money managers and governments will keep putting capital to work in U.S. assets. Treasurys remain liquid and income-generating. The dollar is still the world’s reserve currency. And if the Fed continues to ease, yields could fall even further. All of this points to a steady, long-term rally for U.S. Treasurys.

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