US allies significantly reduce purchases of US Treasury bonds

Data from the US Treasury and State Department indicates that close US allies have sharply reduced their net purchases of US government bonds. In the first eight months of 2026, this group of nations and territories purchased a net total of $174.3 billion, a decrease of more than 60% compared to the same period last year. This represents the lowest level for this period since 2021.

The shift is particularly notable in Asia. Japan, Washington’s largest foreign creditor, saw its net purchases drop by 99% to just $389 million. South Korea recorded a net sale of $23.8 billion, the highest net selling level for this period since data recording began in 1977. Taiwan also joined the group of net sellers.

Analysts suggest the market is losing its "regulars" rather than all foreign buyers. Factors contributing to this trend include unpredictable US policies and weakening local currencies, which reduce investor purchasing power. Some governments, such as Japan, may have sold US securities to support their own currencies during periods of significant depreciation.