Falling foreign holdings and rising borrowing costs pose new challenges for US Treasuries, highlighting geopolitical and financial risks amid shifting global investor confidence.
The United States has good reason to be uneasy. Foreign appetite for Treasuries, long the bedrock of America’s financial privilege, has weakened, and the shift is already feeding through to higher borrowing costs. According to a Federal Reserve note published in May, foreign ownership of US government debt has fallen from close to 60% around 2008-10 to roughly 35% to 40% by 2025, even as the overall stock of foreign holdings has continued to rise. That change matters because Treasury securities remain the global benchmark for safety and liquidity, yet they are now being absorbed more heavily by domestic buyers than before.
The scale of the market is vast. By the end of 2025, outstanding Treasuries amounted to about $30.7tn, or roughly 95% of US gross domestic product. Gross federal debt is higher still, above 120% of GDP, although not all of it is marketable. For years, that debt was easily financed at relatively low cost because foreign governments, central banks and investors were eager buyers. That era has faded.
The biggest foreign holder is Japan, but even its position has diminished over time. The NZZ reported that Japan’s share of foreign Treasury holdings has fallen sharply from pre-financial-crisis levels, though it remains the largest single holder. Reuters reported in July 2025 that foreign holdings of US Treasuries reached a record $9.159tn, with Japan and the United Kingdom leading the increase, while China’s holdings slipped to the lowest level since 2008. In September 2025, Reuters said Japan had lifted its holdings to the highest level since 2022, even as total foreign demand eased slightly.
China’s retreat has been especially striking. Once part of a financial relationship in which US consumption was effectively financed by Chinese purchases of American debt, Beijing has steadily pared back its exposure. The NZZ noted that China’s share of foreign Treasury holdings had dropped to 7.4% by the end of 2025 from a peak of 26.3% in 2010. Other data show the United Kingdom has moved into second place, ahead of China, while Canada and Switzerland have also become more prominent holders.
The reasons are partly financial and partly geopolitical. Higher US deficits, repeated fiscal shocks and lingering inflation have made Treasuries look less impregnable than they once did. They have also become more sensitive to politics. Investors have taken note of comments from the Trump administration that have suggested a more transactional approach to the dollar’s global role, along with occasional talk of making foreign holders pay more.
That concern is not abstract. With fewer foreigners buying and a larger supply of debt to absorb, Washington has to offer better yields. Long-term rates have already climbed, with 30-year Treasury yields above 5%, and the 10-year benchmark edging towards that level. Debt-service costs are now running above the US military budget, a reminder that rising rates have immediate fiscal consequences.
Treasury Secretary Scott Bessent has therefore had little room for error. The NZZ described his efforts to calm markets and noted that he has been trying to support the yen to prevent Japan from selling Treasuries in size. That is a delicate balancing act: the US wants Japan stable, but it also wants to avoid a fresh wave of selling in its own bond market.
The deeper problem is that market confidence is being tested on several fronts at once. Inflation expectations remain fragile, fiscal discipline is lacking and geopolitical trust has weakened. A sustainable response would require the Federal Reserve to help anchor prices, the government to narrow its deficits and a broader diplomatic effort to rebuild confidence among allies. Quick foreign-exchange interventions may buy time, but they do not repair the underlying strain.
For now, Washington is pinning some hopes on domestic sources of demand. Stablecoins, which are often backed by Treasuries, could provide a fresh buyer base. So, too, could the productivity gains promised by artificial intelligence, which might lift growth and ease debt ratios if they materialise at scale. But those are possibilities, not policies.
If they disappoint, and if overseas investors continue to lose faith, the cost of funding America’s deficits could rise further. At that point, Bessent may need more than currency support and reassuring remarks.
- https://www.nzz.ch/pro/die-usa-sind-zu-recht-nervoes-das-auslaendische-vertrauen-in-die-amerikanischen-staatsschulden-ist-gesunken-ld.10018072 – Please view link – unable to able to access data
- https://www.lambdafin.com/articles/foreign-holdings-us-treasuries-by-country – This article provides an analysis of foreign holdings of U.S. Treasuries as of April 2026. It highlights that Japan holds $1.13 trillion, the United Kingdom $768 billion, and China $760 billion, collectively accounting for approximately 31% of total foreign holdings. The article also discusses the historical trends in foreign ownership, noting a decline from over 50% in 2008 to about 28–30% in 2026. Additionally, it examines the implications of these shifts on U.S. borrowing costs and financial markets.
- https://legalclarity.org/who-are-the-major-foreign-holders-of-treasury-securities/ – This article identifies the major foreign holders of U.S. Treasury securities as of May 2025. It reports that Japan holds approximately $1.14 trillion, the United Kingdom $809.4 billion, and China $732.7 billion. The piece also explores the reasons behind these holdings, such as currency reserve management and investment strategies, and discusses the potential implications for U.S. borrowing and global financial markets.
- https://www.federalreserve.gov/econres/notes/feds-notes/the-cslt-unifying-u-s-cross-border-securities-holdings-and-transactions-data-accessible-20260521.htm – This Federal Reserve article introduces the Cross-Border Securities Holdings and Transactions (CSLT) data, which unifies U.S. cross-border securities holdings and transactions data. It presents annual data from 1985 to 2025, showing trends in foreign holdings of U.S. Treasuries. The data indicates a peak foreign share of nearly 60% around 2008-2010, followed by a decline to approximately 35-40% by 2025, with total foreign holdings increasing to about $20 trillion by 2025.
- https://factually.co/fact-checks/finance/china-japan-treasury-note-sales-inflation-market-crash-risk-cdeb92 – This article examines the potential economic impacts of foreign selling of U.S. Treasuries by countries like Japan and China. It concludes that while such actions could lead to higher U.S. yields and tighter financial conditions, they are unlikely to cause runaway inflation or an immediate market crash. The piece discusses the mechanisms through which foreign selling could influence U.S. borrowing costs and financial markets.
- https://www.investing.com/news/economic-indicators/foreign-holdings-of-us-treasuries-surge-to-alltime-high-in-july-chinas-sink-4245904 – This Reuters article reports that foreign holdings of U.S. Treasuries reached an all-time high in July 2025, totaling $9.159 trillion. The increase was led by Japan and the United Kingdom. However, China’s holdings declined to $730.7 billion, the lowest level since December 2008. The article provides insights into the dynamics of foreign investment in U.S. government debt and the factors influencing these trends.
- https://www.investing.com/news/stock-market-news/foreign-demand-for-us-treasuries-slips-in-september-but-japan-steps-up-buying-4366547 – This Reuters article discusses the trends in foreign demand for U.S. Treasuries as of September 2025. It notes a slight decline in foreign holdings to $9.249 trillion, marking the first decrease in six months. Despite this, Japan increased its holdings to $1.189 trillion, the highest since August 2022. The piece highlights the varying investment behaviors of different countries and the implications for U.S. debt markets.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
6
Notes:
The article references data from May 2025 and mentions events up to September 2025. However, the article was published in August 2026, making the information over a year old. This significant time gap raises concerns about the relevance and timeliness of the content. Additionally, the article appears to be a translation from German, which may introduce translation inaccuracies. The original source, Neue Zürcher Zeitung (NZZ), is a reputable Swiss newspaper, but the translation process could have led to subtle errors or misinterpretations. Given these factors, the freshness score is reduced.
Quotes check
Score:
5
Notes:
The article includes direct quotes attributed to Reuters and NZZ. However, without access to the original German text or the specific Reuters articles cited, it’s challenging to verify the accuracy and context of these quotes. The reliance on translated material further complicates verification. Therefore, the quotes cannot be independently verified, leading to a lower score.
Source reliability
Score:
7
Notes:
The article is based on reporting from Reuters and NZZ, both reputable news organizations. However, the reliance on translated content and the lack of direct access to the original sources diminish the overall reliability. The absence of direct access to the original German text or the specific Reuters articles cited makes it difficult to assess the accuracy and context of the information presented.
Plausibility check
Score:
6
Notes:
The claims about the decline in foreign holdings of US Treasuries and the associated economic implications are plausible and align with known economic trends. However, the lack of access to the original sources and the potential for translation errors introduce uncertainties. The absence of direct access to the original German text or the specific Reuters articles cited makes it difficult to assess the accuracy and context of the information presented.
Overall assessment
Verdict (FAIL, OPEN, PASS): REVIEW
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article presents information on the decline in foreign holdings of US Treasuries, referencing data from May and September 2025. However, the content is over a year old, and the reliance on translated material from NZZ and Reuters introduces uncertainties regarding accuracy and context. The absence of direct access to the original German text or the specific Reuters articles cited makes it difficult to assess the accuracy and context of the information presented. Given these factors, a thorough review and independent verification are recommended before publication.