As of February 29, 2024, according to data released by the U.S. Treasury Department, the nine countries holding the most U.S. debt are: Japan (US$1,167.9 billion), China (US$775 billion), the United Kingdom (US$700.8 billion), Luxembourg (US$379 billion), Canada (US$353.8 billion), Belgium (US$320 billion), Ireland (US$316.9 billion), Cayman Islands (US$302.6 billion), France (US$284 billion).

Japan, China, and the United Kingdom continue to hold the top three U.S. debt positions in the world. Among them, Japan's U.S. debt holdings balance is US$1,167.9 billion, an increase of US$16.4 billion from the previous month. China reduced its holdings of US$22.7 billion in U.S. debt, bringing its total holdings down to US$775 billion. The United Kingdom increased its holdings of US$9.6 billion in U.S. debt, with a total holding of US$700.8 billion.

Other U.S. overseas creditors such as Luxembourg, Canada, Belgium, Ireland, the Cayman Islands, and France also saw increases and decreases. In February, four economies chose to reduce their holdings of U.S. Treasuries, while six chose to increase their holdings. Overall, the total amount of U.S. Treasuries held by all countries and economies in the world is $7.97 trillion, which is less than a quarter of the total U.S. federal government debt.

Latest developments: China resumed its pace of reducing its holdings of U.S. Treasuries in May

In the May 2024 International Capital Flows Report, the U.S. Treasury Department disclosed that China's holdings of U.S. Treasuries that month decreased by $2.4 billion from the previous month to $768.4 billion. This change is the smallest since the past year, whether it is an increase or a decrease.

Looking back at April, China slightly increased its holdings of U.S. Treasuries by $3.3 billion, bringing the total holdings to $770.7 billion. This became the only month this year when China's U.S. Treasuries holdings increased, which attracted widespread attention and discussion from the outside world at the time. However, the reduction in holdings in May once again showed that China's long-term trend of reducing its holdings of U.S. Treasuries has not changed. Since April 2022, China's holdings of U.S. Treasuries have not been able to break through the $1 trillion mark. The reduction in March caused the holdings to fall below the low of $769.6 billion in October last year, setting a record low since March 2009.

In May, the overall performance of the U.S. Treasury market was strong, and the yield trend showed a downward trend as the market expected the Federal Reserve to cut interest rates this year. Specifically, the yield on 10-year Treasury bonds fell from 4.684% to 4.512%, while the yield on two-year Treasury bonds fell from 5.046% to 4.893%.

Although China's U.S. Treasury holdings fluctuated in April and May, the changes in these two months were relatively small compared with the past. This is consistent with the slowdown or stagnation of the growth of China's central bank gold reserves during the same period.

Latest developments: Japan, the largest "creditor" of the United States, has continued to significantly reduce its holdings

In May, Japan's holdings of U.S. Treasury bonds fell by $22 billion month-on-month, and total holdings fell to $1.1283 trillion. This marks the second consecutive month that Japan has significantly reduced its holdings of U.S. Treasuries, with the cumulative reduction in two months reaching $59.5 billion. Japan has been the largest overseas holder of U.S. Treasuries since surpassing China's holdings in June 2019. In nine of the past 12 months, Japan has actually increased its U.S. Treasuries holdings.

Japan's recent large-scale reduction in U.S. Treasuries may be related to the country's yen intervention in the foreign exchange market. Market participants have been closely watching Japan's movements as a holder of U.S. dollar reserves because Japan's monetary authorities have indicated that they may intervene to support the yen.

Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, pointed out that foreign holders were basically net buyers of U.S. Treasuries in May, which is consistent with the downward trend in yields that month. He specifically mentioned the situation in Japan, suggesting that it may be related to foreign exchange intervention.

Overall, the total amount of U.S. Treasuries held by foreign investors increased to $8.129 trillion in May from a revised $8.04 trillion in April. Among the top ten overseas holders of U.S. Treasuries, in addition to China and Japan, Luxembourg and Switzerland also reduced their holdings in May, while the other six countries increased their holdings of U.S. Treasuries. The United Kingdom increased its holdings of U.S. Treasuries by $13.1 billion in May, bringing its total holdings to $723.4 billion, making it the third largest holder.

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