Foreign Buying Slows, Japan Goes the Other Way
Foreign ownership of U.S. Treasuries fell slightly in September to $9.249 trillion, breaking a six-month streak of steady buying. The decline isn’t dramatic, but it matters because these bonds are the backbone of global finance.
Even as others pulled back, Japan raised its holdings to $1.189 trillion, its highest level in more than two years. China trimmed its exposure again, now down to $700.5 billion.
Foreign purchases also slowed sharply from August — from $48.5 billion down to $25.5 billion.
This mixed picture signals a turning point in global appetite for U.S. debt.
Why Investors Should Care
You don’t need to be a bond trader to understand the stakes. When foreigners buy fewer Treasuries:
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The U.S. must offer higher yields to attract buyers.
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Higher yields mean lower bond prices.
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Funding the U.S. government becomes more expensive.
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Markets get more sensitive to rate moves, politics, inflation, and global tensions.
Japan is keeping the market afloat, but it can’t fully counterbalance global cooling.
Impact on the Forex Market
Here’s where most people underestimate the ripple effect. Treasury demand is tightly tied to USD strength.
1. Lower foreign buying = weaker demand for USD
Foreign investors must buy dollars to buy Treasuries.
If they buy fewer Treasuries, they need fewer dollars.
That reduces capital inflows into the United States, which can weaken the dollar over time.
2. A softer dollar boosts currencies of countries reducing exposure
China reducing holdings indirectly supports the yuan, at least in the short run, because they are diversifying away from dollar-based assets.
3. Yen impact: Japan’s buying supports USD/JPY upside
Japan’s aggressive buying supports demand for U.S. dollars.
This tends to push USD/JPY higher, or at least prevent it from falling.
If Japan ever reverses this buying, USD/JPY could drop fast.
4. Risk sentiment swings hit FX harder
Less foreign demand for Treasuries increases volatility.
When Treasuries wobble, currencies tied to global risk — like GBP, AUD, CAD — feel it immediately.
Bottom line:
When global investors cool on U.S. debt, the dollar loses one of its biggest pillars.
Impact on Commodity Markets
Commodities don’t trade in a vacuum. They’re priced in dollars, and Treasury flows directly influence how expensive those commodities look to the rest of the world.
1. Weaker dollar = commodities get a natural lift
If Treasury demand weakening pulls the dollar down, commodities priced in dollars — gold, oil, copper, wheat — become cheaper for non-U.S. buyers.
More demand = higher prices.
Gold especially reacts strongly to this.
2. Gold gets double support
Gold loves two things:
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A weaker dollar
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Falling confidence in government debt
Reduced foreign demand hints at long-term concern about U.S. fiscal stability. That’s music to gold’s ears.
Expect gold to stay firm or move higher as long as this trend continues.
3. Oil reacts through the dollar, not Treasury demand
Oil follows the dollar more than bond flows.
A weakening USD tends to push oil higher, especially if OPEC keeps production tight.
4. Industrial metals react to global risk
If bond markets get shaky and recession fears rise, metals like copper may weaken, even if the dollar falls.
Gold benefits.
Copper struggles.
Oil sits somewhere in the middle.
The Big Picture
Foreign demand for Treasuries is more than a bond story.
It affects the USD, gold, commodity inflation, and risk appetite worldwide.
Japan stepping up is helpful, but it doesn’t erase the bigger trend: global investors are slowly becoming more cautious about U.S. debt.
If that continues, expect:
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A gradually weaker dollar
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Higher gold prices
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More volatile commodity markets
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Pressure on countries that rely heavily on dollar-denominated borrowing
This shift isn’t dramatic yet, but it’s one you can’t ignore.