Foreign governments significantly reduced their US treasury holdings in March, with overall holdings falling to $9.25 trillion at the end of March from $9.49 trillion in February, according to Treasury Department data. This decline was primarily driven by the start of the Iran war, which forced governments to liquidate some US dollar reserves to protect their domestic currencies. As reported by CNBC TV18, the reduction reflects increased financial volatility since the Gulf war began and resultant pressure on exchange rates, especially in Asia. Oil prices surged after fighting involving Iran threatened shipping routes and fueled fears of broader supply disruptions, with the war-linked surge in oil prices and currency volatility rattling global markets. The net change in total US Treasury holdings by foreign governments during the period stood at $138.4 billion, with major economies collectively reducing their exposure to inject dollar liquidity into domestic markets and shield local currencies from mounting volatility.
Turkey executed one of the most dramatic treasury selloffs in recent history, with Türkiye's US Treasury holdings plunging from $15.7 billion in February to $1.8 billion in March after approximately $14 billion in net sales. According to Türkiye Today, this represented a nearly 89% reduction in the country's portfolio amid a broader sell-off in government debt markets as the Iran war stoked inflation fears. The figures reflected a sharp reversal from previous months, as Türkiye's total U.S. Treasury holdings had climbed to $16.9 billion in January from $14 billion in December 2025. Turkish policymakers tapped dollar reserves to manage intense pressure on the Turkish lira during the Iran war, which rattled regional markets and drove energy prices higher. The Turkish central bank sold nearly $60 billion during peak demand in late March to prevent the lira from weakening sharply.
China, now the third largest holder of US treasuries, cut their holdings for the seventh consecutive month to $652.3 billion from $693.3 billion in February. This represents the lowest level of China's US treasury holdings since September 2008, coinciding with the onset of the global financial crisis. According to CNBC TV18, other countries among the top 10 holders, including Canada, Luxembourg, France, and Taiwan, also reduced their holdings during the same period. China's Treasury holdings have steadily declined over the past decade from a peak of roughly $1.3 trillion in 2013, with economists noting that official data may not fully capture Beijing's exposure as some Chinese investments are believed to be routed through custodial centers such as Belgium and Luxembourg.
Japan, the largest foreign holder of US treasuries, reduced their position by about $47 billion to $1.2 trillion at the end of March, representing a nearly 4% decline from February levels. As reported by Reuters, Japanese authorities spent nearly 10 trillion yen in market intervention efforts since late April as officials sought to stabilize the currency amid rising energy import costs and heightened geopolitical tensions. The yen weakened past the closely watched 160 level against the U.S. dollar during the period, intensifying pressure on Japanese policymakers. U.S. policymakers preferred Japan avoid large Treasury sales to stabilize the yen, with analysts pointing to trade agreements involving critical minerals, advanced technology and defense as alternative ways to reduce pressure on Japan's foreign exchange reserves. Japan is estimated to have spent around 10 trillion yen ($64 billion) since late April to support the yen after it slid near 160 against the dollar, nearly doubling the scale of its July 2024 intervention.
The United Kingdom significantly increased their treasury holdings to $926.9 billion at the end of March from $897.3 billion in February, making them the second-largest holder of US treasuries. As reported by CNBC TV18, this increase was among the few positive movements during the month, with Ireland and Cayman Islands being among the few buyers in March. Analysts have often viewed UK Treasury flows as a proxy for global investment activity because London serves as a major financial hub for international investors. Belgium held approximately $454 billion in U.S. government debt in March, while Luxembourg's holdings remained near $439 billion over the past year, according to data cited by CNBC.
Foreign investors logged a $142.1 billion valuation loss on long-term treasury holdings in March, according to CNBC TV18. The rising bond yields have concerned global equities, with US and other markets facing selling pressure this week. The 10-year U.S. Treasury yield traded around 4.615% on Tuesday, its highest level since October 2023, while a move toward 5% would push it to levels last seen in 2002. The Treasury selloff reflected both direct liquidation and declining bond values as investors reacted to rising inflation concerns tied to the Middle East conflict. The appeal of government debt instruments also weakened amid expectations of tighter monetary policy and renewed global inflation fears fueled by rising energy prices following the closure of the Strait of Hormuz. Meanwhile, broader market stress tied to the Middle East conflict continued to ripple through global currencies, with the Indian rupee falling to another record low as elevated oil prices and rising U.S. Treasury yields intensified pressure on import-heavy economies.
