Foreign Ownership of U.S. Treasuries

Another important sentiment indicator about the dollar is the rate of foreign buyers of U.S. Treasuries (Table 4.3). The U.S. Treasury International Capital System (TIC) report provides this information. China is the top owner of U.S. debt, purchasing $1.1 trillion of U.S. Treasuries! What would happen if China decided to slow down such purchases? The dollar would severely and negatively react. When rumors that China may diversify away from such purchases, the U.S. dollar reacts with weakness. But it’s important to realize that a precipitous decline in foreign purchases of U.S. debt is unlikely and would hurt those countries, such as China and Japan, which primarily own also almost $1 trillion worth of U.S. Treasuries. It’s not only the amount they own, but whether the trend is up or down from the previous months or years.