US Treasuries’ In Demand Abroad

International investors bought more Treasuries last quarter than any other start to a year since 2009, with holdings approaching $3 trillion, as a new crisis in Europe weighs on the euro and Japan debases the yen.

The Federal Reserve’s holdings of U.S. government debt on behalf of foreign central banks rose $63.5 billion, or 2.4 percent, to $2.95 trillion as of March 27, according to the central bank. China, the largest foreign lender to the U.S., has been buying Treasuries at the fastest pace since 2011.

Rather than slowing purchases as U.S. lawmakers struggled to avoid $600 billion in automatic spending cuts and tax increases, international investors are again seeking Treasuries, underscoring their role as a store of value. The demand is helping Fed Chairman Ben S. Bernanke keep yields low, increasing investor appetite for dollars even after the central bank poured more than $2.5 trillion into the financial system since 2008.

“The U.S. is standing out as a place of relative growth, strength and stability,” Wan-Chong Kung, a bond fund manager in Minneapolis at Nuveen Asset Management, which manages more than $100 billion, said in a March 28 telephone interview. “The big, bad outcomes have been avoided.”

Overseas demand isn’t just coming from central banks. Total foreign holdings rose 0.8 percent in January to a record $5.62 trillion after rising a combined 0.9 percent in November and December, according to the latest Treasury Department data.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell