If there’s one thing that catches the attention of the second Trump administration, it’s how foreign investors behave toward U.S. assets. Perhaps most notably, it’s their attitude toward the safe haven of U.S. Treasuries.
Last month, Deutsche Bank earned the ire of Treasury Secretary Scott Bessent after one of its analysts suggested foreign investors may leverage their holdings of U.S. borrowing and equities against the White House’s threats over the sovereignty of Greenland. While Bessent dismissed the “irrelevance” of Denmark’s holdings of American debt, Trump eased up on his tariff rhetoric after the bond markets hiccuped.
The Trump administration is therefore unlikely to be pleased with reports this week that Chinese banks had been urged to limit their holdings of U.S. Treasuries. Bloomberg reported this morning, citing unnamed sources, that Chinese regulators had advised financial institutions against holding large amounts of U.S. government debt because of questions about volatility and security.
Minding the Bloomberg report, UBS’s Paul Donovan noted this morning that it is nevertheless of note that foreign investors are being advised to rethink their strategy. He said the report “does not include the official holdings, and China’s banks are not major players in the U.S. Treasury market. Nonetheless, the idea that international investors may be less inclined to buy U.S. Treasuries in the future (without dumping existing holdings) is getting attention in markets.” (China is the third-largest holder of U.S. Treasuries.)
Indeed, any jitters in China are only playing into wider questions about whether investors should be hedging themselves against headwinds to the dollar. As Chris Turner, ING’s global head of markets wrote this morning: “Mainland China and Hong Kong together held $938 billion of U.S. Treasuries as of last November. Comments like these come at a vulnerable time for the dollar, when the dollar diversification theme is rife.”
China could not inflict the level of damage on the U.S. bond market that other nations theoretically may wield. Japan, for example, holds nearly double the amount of Treasuries that China owns, with the U.K. also owning some $888 billion in U.S. borrowing as well.
But this morning’s report does speak to a trend emerging from the BRIC (Brazil, Russia, India, China) nations in the second Trump presidency: the selling off or rolling over of America’s debt. The latest data from the Treasury for November 2025 shows holdings by these nations are generally on a downward trajectory.
Brazil, for example, held $229 billion in American Treasuries in November 2024, and 12 months later, this had slipped to $168 billion. In India, November 2024 saw the nation holding $234 billion in Treasury holdings and by November 2025, this had reduced to $186.5 billion.
China has followed a similar, but not identical, path. In November 2024 it owned $767 billion in U.S. Treasuries, which steadily increased to more than $900 billion in August 2025. A run-down then ensued, to $888.5 as of November 2025.
As Turner observed in November, BRIC countries are “quietly leaving the Treasury market.” He added: “We think the decline in India’s holdings probably relates to FX intervention to support the rupee, but suspect there are also geopolitical factors at play too. However, this year has shown that the private sector is more than willing to buy Treasuries, and our call for a weaker dollar in 2026 is based on foreign investors increasing their hedge ratios on U.S. assets rather than selling them outright.”
Hedging to exposure
There’s also little evidence to suggest that foreign investors have, or would, use their holdings in American assets as a tool to discipline the Oval Office.
As Innes McFee, CEO of Oxford Economics, exclusively told Fortune at the end of January: “It’s a convenient story aligned to political narratives, but the reality is there’s no real evidence of capital outflows out of U.S. assets. What there is evidence of is that the rest of the world is hugely exposed to U.S. assets and historically much more exposed than it’s ever been, partly because of the Magnificent Seven and the AI trade and all of that sort of stuff.”
He continued: “I think what happened last year was a sudden realization of, ‘We still want to be exposed to the U.S., we don’t want to sell our holdings in such a fast-growing economy, but we do want to hedge our exposure.’ And so what you saw amongst a lot of pension funds around the world that invest in U.S. assets was a hedging of that exposure. That’s how you can have a situation where the dollar falls, but there’s no capital outflow. For years, people have talked about China weaponizing its holdings of U.S. Treasuries—I don’t think that there’s much credibility in those sorts of statements.”
