China Keeps Shedding U.S. Sovereign Debt. It Just Hit An 18-Year Low.

China's holding of U.S. Treasurys hit an 18-year low in July as it keeps shedding sovereign debt, new data shows.

The country now holds $618 billion in U.S. debt. The figure is the lowest since August 2008, when they stood at $573.7 billion.

The country has been steadily shedding debt for years. The pace has accelerated since 2022 after Washington froze Russian assets following its invasion of Ukraine, prompting countries to doubt about the safety of their wealth in the country.

Axios noted that before the 2008 financial crisis, central banks around the world bought U.S. debt regardless of the yield as they saw it as an ultra-safe bet. That has changed, leading price-sensitive hedge funds and private investors to fill the void.

Recent data shows that the share of U.S. debt owned by foreign governments have also been steadily declining for years, dropping from about 40% around 2010 to 12.2% at the moment.

Treasury yields have been climbing steadily over the past months, recently reaching multi-decades high. They have edged down since, hovering just below 5% on Friday.

The Treasury Department has been increasing debt buybacks, with Secretary Scott Bessent saying that figures will be as high as $6 billion for longer-dated government debt, triple the usual amount.

A recent report noted that the Treasury could dip into its $1 trillion General Account (TGA) to help fund its plan to increase buyback of government bonds. The TGA will allow the Treasury with a large chest to fund the strategy and influence long-term bond yields