Foreign holdings of Treasuries in May rose to their highest since February 2020, Treasury Department data showed on Friday, with investors becoming more comfortable buying U.S. government debt as volatility declined during the month.
Major foreign holders held $7.135 trillion of Treasuries, up from $7.070 trillion in April. May also saw about $65 billion in Treasury purchases, the largest monthly increase since June 2020.
The big increase came from UK buying, data showed, with $35 billion in inflows for a total of $467.7 billion.
Analysts said the inflow reflects not only buying from UK residents, but also includes other foreign investors as they custody their holdings in that country.
“It shows you that there was a turn in sentiment in Treasuries,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.
“U.S. rates started to move lower materially. I am not surprised to see foreign investors deploying their cash during that month given that rates stabilized after their earlier sell-off,” he added.
U.S. benchmark 10-year Treasury yields started May with a yield of 1.599%, slipping to 1.580% by the end of that month.
Japan remained the largest non-U.S. net holder of Treasuries at $1.266 trillion in May, though that was down from $1.276 trillion the previous month.
