Historic Foreign Capital Shift: U.S. Equities' Appeal Surpasses U.S. Treasuries for the First Time
nashnova research
Foreign investors are pouring more money into U.S. equities than U.S. Treasuries for the first time outside a global crisis — the share of Treasuries held abroad has dropped from over 50% to roughly 30%, a signal that global capital now trusts American companies more than the American government's balance sheet.
What exactly happened?
Deutsche Bank's global FX research head George Saravelos flagged a milestone: in the year to March 2026, the U.S. attracted a record $600 billion in net equity inflows — exceeding government and agency bond inflows by the widest margin ever.
This means → foreign money is not leaving America; it is changing lanes inside America — out of Treasuries, into stocks.
Foreign holdings of U.S. Treasuries have slid from a peak above 50% to roughly 30%, while foreign ownership of U.S. equities keeps climbing.
Why are investors dumping bonds for stocks?
Saravelos boils it down to one line: America's private sector and public sector are heading in opposite directions.
In plain terms = U.S. companies are minting record profits (AI boom, all-time-high margins), but the U.S. government keeps borrowing more — the deficit tops 6% of GDP with no end in sight.
This reflects a clean investor logic: lending money to profitable firms (buying stocks) beats lending to an over-spending government (buying Treasuries).
How stretched is Washington's balance sheet?
U.S. national debt crossed $40 trillion last month; the Congressional Budget Office projects this fiscal year's deficit at roughly $2.1 trillion, above 6% of GDP.
The 10-year Treasury yield hit its highest level since November 2023 this week; the 30-year yield surged in tandem.
This means → higher yields raise the government's borrowing cost, feeding a vicious loop: borrow more → pay more interest → need to borrow even more.
What are the heavyweight holders doing?
Norway's Government Pension Fund — the world's largest sovereign wealth fund — has proposed cutting its U.S. Treasury allocation from roughly 34.1% to 21.9%, nearly a one-third reduction.
China's Treasury holdings stood at about $633.4 billion as of June, down noticeably from $731.4 billion a year earlier.
BlackRock is currently overweight U.S. equities and underweight long-dated Treasuries, citing AI-driven earnings strength; its report states: "Long-duration bonds … have become less reliable as portfolio diversifiers."
What comes next?
The central question: with foreign investors and sovereign funds both stepping back, who steps in to buy U.S. Treasuries?
In plain terms = the U.S. government needs to sell over $2 trillion in new debt every year. If traditional buyers keep retreating, either yields rise further until new buyers appear, or the Fed is forced back into the market.
This reflects why the search for a new demand anchor in long-end yields will be the single most important market test over the coming months.
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