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As the world retreats from US Treasuries, will the sell-off deepen?

With new data suggesting a global retreat from US Treasuries in March – the first full month of the US-Israel war on Iran – market…

By Samantha Johnson / May 19, 2026
With new data suggesting a global retreat from US Treasuries in March – the first full month of the US-Israel war on Iran – market worries are on the rise over whether the sell-off could deepen, as interest rate decisions under new Federal Reserve chair Kevin Warsh, US debt sustainability and prolonged Middle East tensions raise investor concerns.

Analysts are currently weighing mounting inflation pressures – which have driven Treasury yields sharply and placed the 30-year yield at its highest level since 2007 – against the US dollar and the Treasury market’s unmatched liquidity, as well as the lack of obvious alternative destinations for global capital flows.

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Official data showed total foreign holdings of US Treasuries fell to US$9.35 trillion in March, down from US$9.49 trillion a month earlier. Seven of the top 10 foreign holders of US Treasuries, including Japan, China, Belgium, Canada and France, trimmed their exposure to US government debt that month.

Japan, the largest foreign holder, shaved down its stockpile by US$47.7 billion in March to US$1.192 trillion.

China cut its holdings of US Treasuries to US$652.3 billion from US$693.3 billion a month earlier, according to data released by the US Treasury Department on Monday afternoon Washington time. It remained the third-largest foreign holder despite the reduction.

In contrast, the second-largest holder, Britain, increased its holdings to US$926.9 billion from US$897.3 billion in February. The Cayman Islands and Ireland also saw small increases.

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Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered, said that mounting concerns over US debt sustainability and geopolitical risks have fuelled a clear desire for alternative safe assets, while cautioning against expectations for a rapid, massive shift.

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