"Selling off America" just an illusion? TD Securities reveals: Foreign funds are buying US bonds at the fastest rate in three years.

According to TD Securities interest rate strategist, in recent months, foreign investors have been increasingly buying larger shares in US Treasury auctions, alleviating concerns in the market about the safe-haven status of US Treasury bonds being compromised and the large deficit driving away foreign capital. Analysis of US Treasury data by TD Bank shows that foreign and international accounts were allocated around 19% of the auction shares in January, the highest level in nearly three years. Over the past five years, this share had reached a high of almost 25% in early 2022, before dropping below 10% in November 2024. The US Treasury issues seven regular Treasury bonds with maturities ranging from two to thirty years, as well as three Treasury Inflation-Protected Securities (TIPS). TD Securities strategists Gennadiy Goldberg, Jan Nevruzi, and Molly Brooks stated in a report that the increase in allocation of auction shares to foreign accounts was "relatively widespread." Goldberg stated in an interview: "As more data accumulates, we increasingly doubt that this 'Sell America' narrative is more fiction than reality." This trading theme emerged in April 2025, when US President Donald Trump announced broad tariffs, causing market turmoil; last month, despite opposition from NATO ally Denmark, Trump revived plans to purchase Greenland, reigniting this theme. Another set of data from the US Treasury shows that after the tariff announcement in April 2025, foreign investors sold $53 billion in Treasury bonds, but they subsequently increased their holdings by $354 billion through November. Goldberg said: "When you ask many foreign institutions how they are dealing with their US Treasury holdings, they will openly admit feeling uneasy about other investors selling, but most - at least from our experience - do not admit that they are also reducing their holdings." According to TD Bank data, foreign participation in auctions significantly increased in November and December, indicating that term premium increases - the excess return of 10-year bonds relative to shorter-term bonds - were one of the attracting factors. The US Treasury auctioned $58 billion in three-year Treasury notes on Tuesday and plans to auction 10-year and 30-year Treasury bonds in the following two days. The results of these auctions will be announced on February 24. Goldberg stated that due to the lack of alternative options, investors may be forced to set aside their concerns. The weakening US dollar suggests that foreign investors may choose to hedge against exchange rate risks while continuing to increase their holdings of dollar-denominated assets. "In terms of diversification convenience, investors actually have no choice," he said.