In August 2024, the Federal Reserve Chair Jerome Powell signaled a dovish shift at the Jackson Hole Symposium, raising expectations of interest rate cuts, which further boosted U.S. Treasury prices. On October 17, local time, the U.S. Department of the Treasury released data showing a divergence in the holdings of U.S. Treasury bonds among its top three foreign creditors: Japan, China, and the United Kingdom. While China reduced its holdings, Japan and the UK increased theirs.

According to the U.S. Treasury’s August 2024 International Capital Flow Report (TIC), Japan increased its U.S. Treasury holdings by $13.5 billion in August, bringing its total to $1.1292 trillion, maintaining its position as the largest holder of U.S. debt.

China, on the other hand, reduced its U.S. Treasury holdings by $1.9 billion, lowering its total to $774.6 billion. This marks the second consecutive month of reductions following its increase in June.

As the second-largest foreign holder of U.S. debt, China’s holdings have been below $1 trillion since April 2022 and have generally been on a downward trend. In January 2024, China reduced its U.S. Treasury holdings by $18.6 billion, starting a three-month streak of sell-offs. This was followed by reductions of $22.7 billion in February and $7.6 billion in March. However, in April, China made its first purchase of the year, increasing its holdings by $3.3 billion. In May, it once again reduced its holdings by $2.4 billion, only to increase by $11.9 billion in June, the largest purchase of the year. In July, China reduced its holdings by $3.7 billion.

The UK increased its U.S. Treasury holdings by $15.6 billion in August, reaching a total of $743.9 billion, making it the third-largest holder of U.S. debt.

The U.S. Treasury report showed a net inflow of $79.2 billion into U.S. securities, both long-term and short-term, as well as banking flows in August. Of this, $79.7 billion came from private foreign investments, while official foreign entities saw a net outflow of $600 million.

Additionally, foreign investors made net purchases of $129.8 billion in U.S. long-term securities in August, following net purchases of $134.7 billion in July. Of this, private foreign investors bought $158.1 billion, while official foreign institutions sold $28.3 billion. Adjusting for certain factors, including foreign portfolio purchases of U.S. stocks through swaps, the overall net purchases of U.S. long-term securities by foreign investors in August totaled $111.4 billion, down from $135.4 billion in July.

The TIC report also revealed that, among the top ten foreign holders of U.S. debt, only China and Canada reduced their holdings in August. Canada, ranked sixth, reduced its holdings by $12.3 billion. The Cayman Islands, a haven for hedge funds, increased its U.S. Treasury holdings by $41.4 billion, the largest increase for the second consecutive month, moving from fourth to fifth place. France, ranked ninth, increased its holdings by $21.3 billion, while the UK’s increase of $15.6 billion slightly outpaced Japan's.

As of August 2024, the top nine foreign holders of U.S. debt, according to data from the U.S. Treasury, were:

1. Japan ($1.1292 trillion)
2. China ($774.6 billion)
3. United Kingdom ($743.9 billion)
4. Cayman Islands ($419.5 billion)
5. Luxembourg ($402.0 billion)
6. Canada ($365.4 billion)
7. Belgium ($325.0 billion)
8. Ireland ($321.8 billion)
9. France ($312.2 billion)
10. Switzerland ($296.3 billion)

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