Foreign holdings of U.S. Treasury securities increased in January, rising to $9.305 trillion from $9.271 trillion the previous month, according to Treasury Department data released on Wednesday. The month-to-month gain followed a drop in December and was driven largely by larger positions held by Japan, the United Kingdom and China - the three largest foreign owners of U.S. government debt.
Measured against a year earlier, foreign-held Treasuries were up 8 percent, underscoring steady overseas demand as Treasury issuance has expanded to fund rising U.S. deficits. That demand persisted despite market volatility and shifting expectations about Federal Reserve policy.
Country moves at the top
Japan remained the largest foreign holder among non-U.S. entities, with holdings of $1.225 trillion in January. That figure represents Japan's largest Treasury position since July 2022, when its holdings were $1.231 trillion. The data show Japan's Treasury holdings have risen in 12 of the past 13 months, a trend that reflects continued Japanese investor interest in higher overseas yields while the Bank of Japan has been slow to normalize policy.
The United Kingdom increased its holdings to $895.3 billion, a 3.4 percent rise from December. The UK also functions as a major custody hub and is often used as a proxy for hedge fund flows. Hedge funds frequently route activity through other custody jurisdictions as well, including the Cayman Islands and the Bahamas.
China, the third-largest foreign holder, lifted its Treasury holdings to $694.4 billion in January from $683.5 billion in December. The data show China’s holdings have fallen by 9 percent since the start of 2025, consistent with an ongoing, longer-term shift away from U.S. assets.
Market flows and yields
Ten-year U.S. Treasury yields began January at 4.189 percent and ended the month at 4.227 percent. Those yield levels remained near what many foreign investors consider attractive on a currency-hedged basis, particularly relative to returns available in Europe and Japan.
On a transaction basis, foreign investors were net buyers of Treasuries in January, with inflows to the sector totaling $49.9 billion, reversing outflows of $27.0 billion in the previous month. At the same time, foreign investors reduced holdings in U.S. equities by $8.3 billion, compared with sizable purchases of $121.0 billion in December - a shift that signals a rotation back toward fixed income.
Overall capital flows were volatile month to month: the United States recorded net capital outflows of $25.0 billion in January, following net inflows of $113.9 billion in December. The swings highlight how cross-border investment can move rapidly as markets reassess interest rate expectations and global risk conditions.
Data points and month-to-month movements reported above are from the Treasury Department release for January.