Recent trends in the U.S. financial market show that foreign investors' preference for U.S. Treasury bonds has not waned at all. In just February alone, foreign capital increased holdings of U.S. Treasury bonds by more than $200 billion, setting an unprecedented all-time high. Particularly, Japan and Britain actively assessed the market situation and launched large-scale buying operations, while China chose the opposite direction, gradually reducing its holdings. This contrasting movement clearly revealed the polarization in the global asset allocation market.
According to the latest statistical data released by the U.S. Treasury Department, as of the end of February, the total amount of U.S. Treasury bonds held by foreign institutions and individuals reached a staggering $9.49 trillion. This figure represents a surge of approximately $200 billion compared to the previous month, marking the highest level in history. Analysts explained that 84% of the total holdings, amounting to $7.76 trillion, consist of long-term bonds with maturities exceeding one year, while the remaining portion comprises short-term bonds maturing sooner. Over the past 12 months, foreign investors' bond holdings have maintained a steady upward trend, increasing by a total of $587 billion, indicating high market confidence in the U.S.'s debt absorption capacity.
The actions of major holding countries present a striking contrast. Japan, currently the largest holder, added $140 billion in February alone, bringing its total holdings to $1.24 trillion—the highest level since February 2022. Due to relatively low interest rates within Japan, institutional investors have adhered to a strategy of focusing on foreign assets with higher guaranteed returns, particularly U.S. Treasury bonds. Following in second place, the United Kingdom added $170 billion, reaching total holdings of $897 billion, setting a new record as the second-highest level ever. In contrast, China, ranked third, sold $10 billion in bonds, reducing its holdings to $693 billion. This is interpreted as part of an asset diversification strategy driven by deepening U.S.-China tensions, maintaining a sustained selling pressure in the long term.
Despite China and some other countries showing moves toward de-dollarization policies, the fact that foreign investors' U.S. Treasury bond holdings have reached an all-time high proves that the dollar's hegemony remains powerful in the global financial system. In a situation where no other asset currently possesses overwhelming liquidity and safety to replace U.S. Treasuries, the aggressive buying by major countries including Japan and Britain supports the market's unwavering trust in dollar assets. This phenomenon demonstrates a tendency for institutions in various countries to eventually return to the dollar during crises, even amidst frequent geopolitical changes. Therefore, it is deemed that the discourse on de-dollarization is premature to lead to a substantive shift in hegemony, and the dollar's dominance remains firmly entrenched.