Multiple countries sold off US Treasury bonds in March, and the Middle East upheaval triggered a major adjustment in global dollar reserves.
2026-05-20 10:15:38
As geopolitical tensions in the Middle East continue to escalate, a sharp rise in energy prices has triggered widespread exchange rate fluctuations. In March, central banks around the world reduced their holdings of US Treasury bonds in a concentrated manner, using the disposal of dollar reserve assets to stabilize their own currencies and resist the economic impact of the energy shock.
Significant divergence has emerged in holdings data among major Asian economies and key economies such as Japan. Overall overseas holdings of US Treasury bonds have fallen sharply, while the market's implicit holding structure and differences in various countries' market support strategies are gradually becoming apparent, leading to a profound adjustment in the global dollar asset allocation landscape.
On Monday evening Beijing time, the U.S. Treasury Department released the latest cross-border capital holdings data, officially confirming the global trend of overseas countries reducing their holdings of U.S. Treasury bonds in March.
Among them, major Asian countries reduced their holdings of US Treasury bonds to $652.3 billion, a 6% decrease from February, marking the lowest holding level since September 2008. Japan, the world's largest foreign holder of US Treasury bonds, also significantly reduced its holdings that month, with a cumulative reduction of approximately $47 billion, bringing its total holdings down to $1.191 trillion.
Driven by the reduction in holdings by the two major countries, the overall overseas holdings of US Treasury bonds decreased from $9.49 trillion in February to $9.25 trillion, and the market was in a strong selling atmosphere.
This large-scale reduction in holdings stems from the escalating tensions between the US and Iran, which have driven up international oil prices and weakened the Japanese yen and many Asian currencies. Asia-Pacific economies, heavily reliant on Gulf oil imports, are facing an energy shock unseen in decades, prompting central banks to sell off some of their dollar assets to raise funds for foreign exchange market stabilization.
Frederic Neumann, chief Asia economist at HSBC, said that the turmoil in the Gulf region has exacerbated global financial volatility, putting significant pressure on the currencies of many Asian countries. Central banks around the world reducing their holdings of US Treasury bonds is a routine operation in response to market conditions. Using US Treasury assets to obtain funds for currency stabilization is the main reason for this reduction.
He further explained that during periods of significant market volatility, countries proactively optimize their cross-border asset portfolios. Some institutions are reducing their holdings of US Treasury bonds, partly due to the anticipation that rising inflation will continue to depress bond prices, thus mitigating the risk of asset depreciation; and partly to increase their holdings of highly liquid assets, reserving sufficient funds for larger-scale financial market interventions in the future.
The US Treasury market continues to weaken, with rising inflation concerns prompting investors to demand higher returns, leading to a sustained decline in bond prices. In March alone, overseas investors suffered a book loss of $142.11 billion on long-term US Treasury bonds, and the shrinking asset value has further prompted countries to adjust their portfolio structures.
Amid widespread global selling, the portfolio structure has become significantly divergent. Many small and medium-sized economies have reduced their holdings, while the UK has chosen to buck the trend and increase its holdings, adding approximately $29.6 billion to its US Treasury bonds in March, bringing its total holdings to $926.9 billion, making it one of the few major holders of increased holdings in the market.
Regarding the changes in US Treasury holdings by major Asian countries, the market is generally focused on implicit holding data. Since reaching its peak in 2013, major Asian countries have been steadily reducing their direct holdings. Industry insiders generally believe that official statistics fail to fully capture actual holdings, and financial transit regions such as Belgium and Luxembourg have always been important channels for Chinese overseas funds to invest in US Treasury bonds.
Xu Tianchen, a senior economist at the Economist Intelligence Unit, stated that after including implicit holdings through transit channels, the overall investment volume in US Treasuries by major Asian countries has remained relatively stable , and recent holding data from relevant transit regions have also remained stable. Liu Jie, Managing Director of Global Research at Standard Chartered Bank, also stated that the overall allocation of US Treasuries by major Asian countries is generally stable, and short-term fluctuations are merely temporary market behavior.
After the yen's exchange rate broke through a key psychological level, soaring oil import costs further widened Japan's current account deficit, increasing downward pressure on the currency. The Bank of Japan intervened in the foreign exchange market from late March to early April. Whether Japan will continue to sell large amounts of US Treasury bonds to stabilize the exchange rate has become a key concern for the US.
Vikas Pershad, portfolio manager at Aberdeen, said that the US policy stance is clear: it does not want Japan to rely on selling US Treasury bonds to alleviate exchange rate pressure, but rather hopes to alleviate the pressure on Japan's foreign exchange reserves and smoothly navigate currency fluctuation cycles through diversified cooperation such as mineral trade and technological cooperation.
Overall, the energy crisis coupled with exchange rate volatility directly triggered the current global wave of US Treasury bond reductions, with countries proactively reducing their dollar bond holdings to stabilize exchange rates and mitigate risks. In the short term, market risk aversion is expected to continue, and the April holdings data to be released next month will further confirm the extent of adjustments to foreign exchange reserves by various countries.
In the future, global central banks will pay more attention to asset diversification, and the proportion of single-dollar assets will continue to be optimized, gradually leading to a more diversified and balanced global foreign exchange reserve structure.
Significant divergence has emerged in holdings data among major Asian economies and key economies such as Japan. Overall overseas holdings of US Treasury bonds have fallen sharply, while the market's implicit holding structure and differences in various countries' market support strategies are gradually becoming apparent, leading to a profound adjustment in the global dollar asset allocation landscape.
Official data released shows that major economies are simultaneously reducing their holdings of US Treasury bonds.
On Monday evening Beijing time, the U.S. Treasury Department released the latest cross-border capital holdings data, officially confirming the global trend of overseas countries reducing their holdings of U.S. Treasury bonds in March.
Among them, major Asian countries reduced their holdings of US Treasury bonds to $652.3 billion, a 6% decrease from February, marking the lowest holding level since September 2008. Japan, the world's largest foreign holder of US Treasury bonds, also significantly reduced its holdings that month, with a cumulative reduction of approximately $47 billion, bringing its total holdings down to $1.191 trillion.
Driven by the reduction in holdings by the two major countries, the overall overseas holdings of US Treasury bonds decreased from $9.49 trillion in February to $9.25 trillion, and the market was in a strong selling atmosphere.
This large-scale reduction in holdings stems from the escalating tensions between the US and Iran, which have driven up international oil prices and weakened the Japanese yen and many Asian currencies. Asia-Pacific economies, heavily reliant on Gulf oil imports, are facing an energy shock unseen in decades, prompting central banks to sell off some of their dollar assets to raise funds for foreign exchange market stabilization.
Industry insiders interpret the logic behind the share reduction as primarily driven by foreign exchange market intervention.
Frederic Neumann, chief Asia economist at HSBC, said that the turmoil in the Gulf region has exacerbated global financial volatility, putting significant pressure on the currencies of many Asian countries. Central banks around the world reducing their holdings of US Treasury bonds is a routine operation in response to market conditions. Using US Treasury assets to obtain funds for currency stabilization is the main reason for this reduction.
He further explained that during periods of significant market volatility, countries proactively optimize their cross-border asset portfolios. Some institutions are reducing their holdings of US Treasury bonds, partly due to the anticipation that rising inflation will continue to depress bond prices, thus mitigating the risk of asset depreciation; and partly to increase their holdings of highly liquid assets, reserving sufficient funds for larger-scale financial market interventions in the future.
The US Treasury market continues to weaken, with rising inflation concerns prompting investors to demand higher returns, leading to a sustained decline in bond prices. In March alone, overseas investors suffered a book loss of $142.11 billion on long-term US Treasury bonds, and the shrinking asset value has further prompted countries to adjust their portfolio structures.
Position trends diverged, with a few countries bucking the trend and increasing their holdings.
Amid widespread global selling, the portfolio structure has become significantly divergent. Many small and medium-sized economies have reduced their holdings, while the UK has chosen to buck the trend and increase its holdings, adding approximately $29.6 billion to its US Treasury bonds in March, bringing its total holdings to $926.9 billion, making it one of the few major holders of increased holdings in the market.
Regarding the changes in US Treasury holdings by major Asian countries, the market is generally focused on implicit holding data. Since reaching its peak in 2013, major Asian countries have been steadily reducing their direct holdings. Industry insiders generally believe that official statistics fail to fully capture actual holdings, and financial transit regions such as Belgium and Luxembourg have always been important channels for Chinese overseas funds to invest in US Treasury bonds.
Xu Tianchen, a senior economist at the Economist Intelligence Unit, stated that after including implicit holdings through transit channels, the overall investment volume in US Treasuries by major Asian countries has remained relatively stable , and recent holding data from relevant transit regions have also remained stable. Liu Jie, Managing Director of Global Research at Standard Chartered Bank, also stated that the overall allocation of US Treasuries by major Asian countries is generally stable, and short-term fluctuations are merely temporary market behavior.
Japan's market intervention draws attention; the US does not endorse the sale of US Treasury bonds to rescue the market.
After the yen's exchange rate broke through a key psychological level, soaring oil import costs further widened Japan's current account deficit, increasing downward pressure on the currency. The Bank of Japan intervened in the foreign exchange market from late March to early April. Whether Japan will continue to sell large amounts of US Treasury bonds to stabilize the exchange rate has become a key concern for the US.
Vikas Pershad, portfolio manager at Aberdeen, said that the US policy stance is clear: it does not want Japan to rely on selling US Treasury bonds to alleviate exchange rate pressure, but rather hopes to alleviate the pressure on Japan's foreign exchange reserves and smoothly navigate currency fluctuation cycles through diversified cooperation such as mineral trade and technological cooperation.
Summarize
Overall, the energy crisis coupled with exchange rate volatility directly triggered the current global wave of US Treasury bond reductions, with countries proactively reducing their dollar bond holdings to stabilize exchange rates and mitigate risks. In the short term, market risk aversion is expected to continue, and the April holdings data to be released next month will further confirm the extent of adjustments to foreign exchange reserves by various countries.
In the future, global central banks will pay more attention to asset diversification, and the proportion of single-dollar assets will continue to be optimized, gradually leading to a more diversified and balanced global foreign exchange reserve structure.
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