In June, the amount of U.S. Treasury securities held by foreign entities declined, with Japan leading the reduction.

Foreign investors' holdings of U.S. Treasury bonds decreased in June, with both Japan and China recording significant reductions, raising concerns about the demand outlook for U.S. debt. According to data released by the U.S. Treasury Department on Monday, the total amount of U.S. Treasury bonds held by foreigners fell by $72.1 billion month-on-month, bringing the total down to $9.3 trillion. Since hitting a historical peak in February of this year, foreign holdings have declined in three of the past four months. Japan, the largest overseas holder of U.S. Treasury bonds, reduced its holdings by about $26.4 billion in June, bringing its total down to $1.12 trillion, the largest decrease among all countries. China followed closely, with a decrease of $25.9 billion, bringing its holdings to $633.4 billion. The UK held $939.9 billion, down $8.7 billion from the previous month. Notably, U.S. Treasury Secretary Janet Yellen announced a rare participation in coordinated interventions in the foreign exchange market in late July. According to market analysts, one consideration behind this move was to prevent Japan from having to sell U.S. Treasury bonds on a large scale to support the yen, which would in turn drive up U.S. borrowing costs. Paresh Upadhyaya, a strategist at Pioneer Investments, stated that the likelihood of Japan further reducing its Treasury bond holdings has significantly decreased following U.S. intervention. U.S. Treasury bonds are under pressure as foreign holdings continue to decline. This year, U.S. Treasury bond prices have consistently been under pressure. Concerns over the persistently high U.S. fiscal deficit and inflation remaining above target levels have led to a cautious market sentiment, with Treasury bonds recording losses during this period. It is important to note that the U.S. Treasury's foreign holdings data also includes valuation changes in addition to actual buy and sell transactions, thus a decline in holdings does not necessarily equate to net selling. The immediate backdrop to Japan's reduction in U.S. Treasury bond holdings is the ongoing pressure on the yen. In recent months, the yen has weakened considerably, forcing Tokyo authorities to intervene in the market multiple times to stabilize the exchange rate, leading to fluctuations in their holdings of U.S. Treasury bonds. In late July, U.S. Treasury Secretary Janet Yellen announced joining the intervention efforts, a move that is quite rare in recent years. Some market observers pointed out that Washington's decision stemmed from concerns that Japan might be forced to sell U.S. Treasury bonds to raise U.S. dollars. Should this scenario occur, U.S. borrowing costs would face upward pressure. Paresh Upadhyaya from Pioneer Investments remarked: Japan's reduction in holdings is clearly linked to foreign exchange intervention. There is no doubt that a large-scale sell-off of U.S. Treasury bonds by Japan will not be repeated. This article is reproduced from "Wall Street Insights," author: Bao Yilong; edited by GMTEight: Huang Xiaodong.