On Monday, April 17th, the U.S. Treasury Department released the latest International Capital Flow report (TIC), which showed that foreign investors are losing confidence in the US Treasury bonds. According to the report, the total foreign holdings of US Treasury bonds decreased by $58.9 billion in February 2023, down to $7.3436 trillion. This decrease marks a reversal from three consecutive months of growth and a $360 billion reduction from the same period last year.

The report also highlighted that the two largest holders of US bonds, Japan and mainland China, both decreased their holdings in February 2023. Japan's holdings decreased by $22.6 billion to $1.0818 trillion, while mainland China continued its trend of selling off US bonds for the seventh consecutive month, further reducing its position by $10.6 billion to $848.8 billion, marking the eleventh month below $1 trillion.

One of the reasons behind this decrease in foreign holdings of US Treasury bonds is the rise in US bond yields, which has caused significant official buyers to reduce their holdings to diversify risks. Moreover, historically, a situation where long-term bond yields are lower than short-term bond yields signifies an impending economic recession. This situation has led to concerns among economists and investors about the future of the US economy.

Former US Treasury Secretary Summers also expressed his concerns about the Federal Reserve's interest rate hikes to curb inflation, stating that they have not been effective and could lead to a lack of economic momentum. This raises important questions about the effectiveness of the US government's economic policies and the impact they may have on global financial markets.

In summary, the latest TIC report has revealed that foreign investors are losing confidence in US Treasury bonds, which could have significant implications for the US economy and global financial markets.

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