Goldman Sachs: Foreign Demand for U.S. Corporate Bonds Remains Robust, Impact of Japanese Divestment Manageable
nashnova research
Foreign investors bought a net $251 billion in US corporate bonds through June, on pace to approach last year's record $392 billion — Goldman sees no realistic scenario for a large-scale repatriation, even as Treasury yields hit 5%.
How much are foreigners buying — and what does the pace tell us?
Through June, foreign investors net-purchased $251 billion in US corporate debt — roughly 64% of last year's full-year record of $392 billion, in just six months.
This means → at the current run-rate, full-year inflows could match or approach the 2024 high. Demand has not broken.
Foreigners now hold about 29% of the US corporate bond market — a share too large to ignore in pricing.
Who is buying? How far apart are Europe and Asia?
Since early 2022, European investors have accounted for 52% of foreign net purchases — the dominant buyer.
Asian investors contributed 21% — less than half the European share.
In plain terms = Europe is the main engine; Asia is the sidecar. Even if the feared "Asian pullback" materializes, Europe's sheer volume naturally dilutes the shock.
Will Japanese repatriation crash the market?
Japan is the current flashpoint: domestic bond yields are rising and policymakers are urging capital to come home.
Goldman strategist Amanda Lynam expects further Japanese selling of US investment-grade and high-yield bonds to be "manageable in the context of the broader market."
This means → Japanese selling is real, but set against 29% foreign ownership and Europe's 52% share of flows, it is not large enough to shift the supply-demand balance.
Yields just hit 5% — why haven't foreigners left?
The 10-year US Treasury yield touched 5%, the highest since 2007. Borrowing costs are up across the board.
Goldman's core argument: the US corporate bond market has no substitute of comparable scale and depth — that is the fundamental reason foreign money stays.
In plain terms = it is not that foreigners enjoy paying more; it is that no other pool on the planet is big enough to absorb their capital while still offering liquidity to get in and out.
What is Goldman's bottom line — and what risk remains?
Lynam stated explicitly: "A large-scale repatriation of capital back home is unlikely" — foreign buying will continue to provide a floor under US credit markets.
This reflects Goldman's measured pushback against the "de-dollarization" narrative — the data show capital still flowing in, not out.
The unresolved risk: if Fed policy keeps pushing yields higher, hedging costs — the price foreigners pay to lock in currency exposure on dollar assets — could rise further, potentially softening demand at the margin. That is the question Goldman's report does not fully answer.
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