Allies of Washington Cut Treasury Purchases by More Than 60% to $174.3 Billion
Key Facts
Countries and regions classified as aligned with the United States made net purchases of $174.3 billion in U.S. Treasury securities, excluding Treasury bills, during the first eight months of 2026, Bloomberg reported. Purchases by the group fell by more than 60% from the same period a year earlier, reaching their lowest level for that period since 2021. The figure measures net purchases of long-term securities and excludes Treasury bills, so it does not by itself represent total foreign demand for U.S. debt instruments. Nor does it by itself prove that allied central banks have changed strategy or that foreign investors are withdrawing from dollar assets. The report comes alongside official data presenting a more mixed picture of foreign holdings in August.
At the end of August, Japan held $1,068.3 billion in Treasury securities, compared with $1,103.9 billion at the end of July, according to the U.S. Treasury Department’s major foreign holders table. Holdings by mainland China stood at $590.7 billion, down from $618.0 billion the previous month. Year over year, Japan’s holdings fell from $1,183.9 billion at the end of August 2025 to their level in August 2026. The figures show a decline in holdings by two major holders, but they refer to securities outstanding at month-end, not net purchases by the group of countries aligned with the United States during the eight months. The declines in Japan’s and China’s holdings also do not, on their own, explain the reasons behind the group’s purchase movements covered in Bloomberg’s report.
More broadly, total foreign holdings of Treasuries rose to $9,331.7 billion at the end of August, from $9,248.4 billion at the end of July, the department said. By contrast, holdings classified as those of foreign official institutions fell to $3,755.6 billion from $3,773.1 billion. The comparison shows a divergence between an increase in total foreign holdings and a decline in official institutions’ holdings over the same month. The Treasury Department also reported that foreign investors made net purchases of $300.7 billion in long-term U.S. securities in August; $257.8 billion came from foreign private investors and $42.9 billion from official institutions. Net capital inflows to the United States, including long-term and short-term securities and banking flows, totaled $199.8 billion, of which $178.5 billion came from the private sector and $21.3 billion from official institutions.
The Treasury Department cautions that holdings data do not always identify the ultimate owner accurately, as U.S. securities may be held in accounts outside the United States without being attributed to their actual owners. The department said this makes it difficult to draw precise conclusions about changes in each country’s holdings of U.S. financial assets. This caveat means national figures may not accurately reflect the identity of the ultimate investor, limiting what comparisons between countries can show about direct ownership. Monthly flows and purchases by a specific group also measure different aspects of the market, so neither is sufficient on its own to establish a broad strategic shift in reserves or investors’ abandonment of the dollar. According to the available release from the U.S. Census Bureau, durable goods orders in August totaled $338.6 billion and were little changed after July’s 0.9% increase.
In the bond market, the yield on the 10-year U.S. Treasury was 4.98% on October 26, compared with 5.00% at the previous Friday’s close, after topping 5.30% earlier in October, according to The Associated Press. The move provides a recent reading on yields alongside declines in holdings recorded for Japan, China and official institutions, without the available sources establishing a causal link between the movements. The Federal Reserve meets on October 27 and 28, with its next meeting scheduled for December 8 and 9. The Treasury Department is scheduled to release September TIC data on November 18. That data will provide a subsequent reading on flows and holdings, while interpretations of ownership by country remain subject to the department’s caveats about overseas custodial accounts.