The share of US government bonds held by foreign investors continued to drop in September with China holding the lowest amount since February 2017, according to Bloomberg. Japan, the largest foreign holder, also offloaded for the second straight month.
However, Federal Reserve’s bond purchases have compensated for the decline in the foreign demand for treasuries. “This year the Federal Reserve has been the biggest domestic player, snapping up some $2 trillion since March as part of its efforts to counter the economic toll of the Covid-19 pandemic,” Bloomberg noted.
As such, the 10-year yield has dropped by over 100 basis points this year. The benchmark yield is currently seen at 0.85%, having put in a record low of 0.36% during the coronavirus-induced financial market crash of March.
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