Foreign investors increased their holdings of U.S. Treasuries in February, lifting total foreign ownership to a new high of $9.49 trillion, according to Treasury Department data released on Wednesday. The February total represented a 2.1% increase from January's $9.29 trillion and marked a second month of rising foreign positions in U.S. government debt.
Measured year over year, foreign-owned Treasuries were up 6.6%, a rise that reflects both lower yields earlier in the year and the relative appeal of U.S. returns compared with other developed markets. Observers say the flows underscore sustained appetite for U.S. debt even as markets reassess the outlook for the Federal Reserve's interest rate policy.
Country-level movements
Japan and the United Kingdom, the two largest foreign holders, accounted for much of the February increase. Japan held $1.239 trillion in Treasuries in February, the largest Japanese stockpile since February 2022 when its holding peaked at $1.303 trillion. Japan's Treasury holdings have increased in 13 of the last 14 months, reflecting steady demand from domestic institutions pursuing higher yields overseas while local interest rates remain low as the Bank of Japan continues to work on moving away from ultra-loose policy.
The United Kingdom raised its holdings to $897.3 billion in February, up 2% from January. The U.K. is widely regarded as a major custody center for global investors, and flows routed through it are often used as a gauge of hedge fund positioning and other cross-border activity.
China, the third-largest foreign holder of U.S. Treasuries, reduced its stock slightly to $693.3 billion in February. The data show that China's Treasury holdings have fallen by 9% since January 2025, part of a longer-term pattern of diversification away from U.S. assets amid geopolitical tensions and efforts to allocate reserves into other currencies and investments.
Market context and capital flows
The February rise in foreign demand occurred as the benchmark 10-year Treasury yield declined over the month from around 4.277% to 3.962%. The change in yields and the movement of foreign reserves coincided with a notable swing in monthly net capital flows: the data showed net capital inflows of $184.5 billion in February, following preliminary net outflows of $25 billion in January.
Analysts note that monthly net capital flows may remain volatile given recent geopolitical developments. The data specifically referenced potential fallout on market sentiment from the U.S.-Israeli war with Iran, which began on February 28, as a factor that could influence investor behavior and cross-border capital movements.
Overall, the February figures highlight continued foreign demand for U.S. government debt, concentrated among major custody and reserve managers, while also reflecting shifting reserve strategies in some countries.