Foreign Investors Shift to U.S. Equities as "Risk-Free" Status of Treasuries Comes Under Question
nashnova research
Foreign inflows into US stocks have overtaken Treasuries for the first time this century, reaching 2.8% of GDP; meanwhile the 10-year yield has breached 5% and multiple institutions openly question whether US government debt is still 'risk-free' — global capital is redefining what counts as a safe asset.
Where is the money going — why are equities suddenly beating Treasuries?
Deutsche Bank's analysis of Treasury data shows foreign inflows into US equities averaged 2.8% of GDP in the year to June, exceeding the 2.0% flowing into Treasuries.
This is the first time this century the pattern has flipped (barring brief episodes during Covid and the post-GFC period).
This means → foreign investors are voting with real money: corporate America's ability to earn profits looks more trustworthy than Washington's ability to service its debt.
George Saravelos, Deutsche Bank's global head of FX research, calls it "a huge shift in the US asset market."
Does 'risk-free' still hold — what is wrong with Treasuries?
The US 10-year yield broke 5% this week, a first since 2023; the 30-year has climbed from 4.83% to 5.32% year-to-date.
In plain terms = surging yields mean the market demands a bigger reward to lend to Washington — that demand itself is a vote of no confidence in "risk-free."
US government debt topped $40 trillion last month and the deficit keeps widening. BlackRock's James Turner, head of EMEA fixed income, says bluntly: "At these deficit levels, if this were a company, you would not call it risk-free."
Man Group's Matt Rowe adds he has "never heard so much concern about what 'risk-free' actually means."
Why can equities absorb this money — how strong are corporate earnings?
The S&P 500 is up roughly 12% year-to-date and on track for a fourth consecutive year of double-digit gains.
FactSet data show S&P 500 earnings grew 52% year-on-year in Q2 2026, with AI investment pushing margins to fresh highs.
Marija Veitmane, head of equity research at State Street, says institutional clients are shifting more capital from government bonds into equities — "Corporates look very, very solid."
This reflects a structural divergence: private-sector balance sheets keep expanding while the public-sector balance sheet keeps deteriorating.
What are the big players doing — how is sovereign money moving?
Norway's sovereign wealth fund — roughly $2.3 trillion in assets — proposed this month to cut about $80 billion in US Treasury holdings and reinvest in agency-backed mortgage-backed securities (MBS, bonds underpinned by home loans).
Treasury Secretary Scott Bessent announced a $6 billion buyback of long-dated Treasuries last week, but the market shrugged.
This means → even the world's largest sovereign fund is trimming Treasuries, and Washington's own buyback failed to move the needle on confidence.
What does this mean for the dollar and global allocation — has the underlying logic changed?
Saravelos argues the dollar may be decoupling from Treasury inflows and re-linking to equity inflows.
In plain terms = the old playbook — global panic drives money into Treasuries, the dollar strengthens — may be breaking down. The dollar could now strengthen when risk appetite rises, not when fear spikes.
He frames US assets as "no longer 'safe' assets but the destination of choice for risk-seeking capital."
This signals that the foundational assumption behind global allocation is shifting: if Treasuries are no longer the anchor, every asset priced off that benchmark needs recalibrating.
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