Foreign investors increase holdings in US corporate bonds via Investing.com

Citi reported that global investors increased their holdings of corporate bonds of US issuers by $11.1 billion in June. Year-to-date, foreign demand has reached $172 billion, equal to the pace of inflows seen in the previous years of 2020 and 2023.

This robust demand played a significant role in absorbing the net supply of US investment bonds, with foreign investors accounting for 44% of the total, beating the 2016 average of 42%.

The foreign investment trend continued in July, with private investors buying $27 billion of long-term U.S. Treasuries in June, while foreign officials remained net sellers, albeit with reduced sales from $15 billion in May to 2, 2 billion dollars in June.

Total foreign private purchases in the first half of the year amounted to $352 billion, driven by a slowdown in supply in G10 countries and attractive yields offered by US Treasuries.

In the government bond market, foreign investors bought $6.2 billion in June, with a notable increase of $12 billion in holdings by Japanese officials. Despite a $72 billion net global increase in foreign US Treasuries holdings in June, Citi applied a negative rating adjustment due to a rise in US 5-year Treasuries during the month.

European investors, led by France with an investment of $26 billion, continued strong demand for long-term US Treasuries, marking the ninth straight month of net purchases. Canada followed as the second largest buyer with $18 billion.

These purchases are attributed to several factors, including low supply of European government bonds, the yield gap between US Treasury and commodity yields and high energy prices.

Instead, the Cayman Islands became the biggest seller of long-term US Treasuries in June, selling $19 billion. This activity is likely related to hedge fund strategies and tightening swap spreads.

Japanese officials, after selling government bonds in May to fund currency interventions, bought back $12 billion in June, likely financed by selling long-term U.S. Treasuries. Japan was the biggest seller of US Treasuries for the month.

However, the pace of sales from Japanese officials is not expected to continue as the rate has fallen recently.

China, which was a net seller of US Treasuries in the first half of the year, was the biggest official buyer in June with $7 billion, followed by India with $5 billion.

With the exchange rate returning to levels seen earlier in the year, Chinese officials are expected to buy back some of the US Treasuries sold earlier. India’s steady buying trend of the past five months is expected to continue.

This article was generated with AI support and reviewed by an editor. For more information, see T&C.