Foreign holdings of US government debt fall to lowest level since 2025

Foreign holders of US government debt sold a net $50 billion in July, pushing the total down to $9.25 trillion. That is the lowest level since October 2025 and the fourth monthly decline in five months. In total, $239 billion in foreign holdings disappeared over the past five months. Both Japan and China continued to reduce their positions, with China reaching its lowest level since 2008.

In brief:

• Foreign holdings of US government debt fell by $50 billion in July to $9.25 trillion
• Japan sold $13 billion and China $15 billion in US Treasuries
• China’s position slid to $618 billion, the lowest level since August 2008

Japan and China continue to cut their positions

Japan, the largest foreign holder of US government debt, sold $13 billion in July and saw its position fall to $1.11 trillion. That is the lowest level since January 2025. Japan has long been grappling with the question of how many US bonds it can hold now that its own interest rates are rising. The Bank of Japan raised rates earlier this year to 1.25%, the highest level in 31 years, which increases the pressure on Japanese institutions to restructure their foreign investments.

China, the third largest foreign holder, sold $15 billion in July, leaving it at $618 billion. That is the lowest level since August 2008, well before the global financial crisis fully struck. The unwinding of the Chinese position has been under way for years, but the recent declines are accelerating the pace.

Fragile foreign demand for US government debt

The figures come from the Federal Reserve and are published by the financial newsletter The Kobeissi Letter. It points out that the decline reflects not only selling decisions, but also valuation changes caused by price movements in the bonds themselves.

The sustained reduction by large holders such as Japan and China increases the pressure on the US bond market. When foreign demand falls away, domestic demand must absorb it, or yields must rise further to entice investors. That makes the US government’s financing costs more expensive at a time when the budget deficit is already under pressure.