Overseas Investors Net Purchased $80.2 Billion in US Treasuries in June; China’s Holdings Increased by $100 Million

Xinhua Finance, Beijing, August 18 – The US Treasury Department recently released the June 2025 International Capital Flows Report (TIC), showing that overseas demand for US Treasuries continued to recover in June. Major foreign investors increased their holdings of US Treasuries by $80.2 billion month-on-month to $9.13 trillion, marking the fourth consecutive month above $9 trillion. The top three "creditors"—Japan, the UK, and mainland China—all increased their holdings of US Treasuries to varying degrees in June, with mainland China’s holdings rising slightly by $100 million to $756.4 billion.

Specifically, Japan and the UK continued to expand their holdings of US Treasuries in June, with increases of $12.6 billion and $48.7 billion month-on-month, respectively, reaching $1.1476 trillion and $858.1 billion. Since surpassing mainland China in March to become the second-largest overseas holder of US Treasuries, the UK has continued to widen the gap, which now stands at $101.7 billion.

Looking back at June, progress in trade negotiations effectively boosted market optimism, while persistently high inflation fueled expectations of rate cuts, reigniting investor confidence in US Treasuries, which had previously faced sell-offs, leading to a decline in yields. The 10-year US Treasury yield fell by 19 basis points (BP) from the end of May to 4.23%, hitting a nearly two-month low. The 2-year yield also dropped by 19 BP to 3.72%, bringing the cumulative decline in the first half of the year to 52 BP.

Federal Reserve Chair Jerome Powell stated at the time that although he remained concerned about tariffs potentially driving inflation higher, if inflation remained under control, rate cuts could come sooner. Before him, Fed Vice Chair for Supervision Michael Barr and Fed Governor Christopher Waller had already expressed support for a rate cut as early as July.

Compared to the beginning of the year, market expectations for rate cuts had significantly increased by June. Most traders expect the Fed to lower interest rates to the 3.5%-3.75% range by December. Traders have increased bets on bullish options for US Treasuries, anticipating that the 10-year yield could fall to 4%.

Former US Treasury Secretary Lawrence Summers, however, argued that the actual debt increase caused by the bill could far exceed $4 trillion. Summers said the bill promoted by Trump would increase the US debt burden and undermine the country’s standing as a major power.

Maya MacGuineas, President of the Committee for a Responsible Federal Budget, issued a statement saying that the US debt reaching $37 trillion is yet another alarming reminder of the country’s dire federal fiscal situation. This year, the US government will spend $1 trillion on debt interest payments, making interest payments the second-largest item in the federal budget, surpassing defense and Medicare spending.