Institute of International Finance data shows cross-border flows favoring euro and yen bonds over US government paper for the first time since 2021.
Cross-border investors reduced US Treasury holdings by USD 28 billion in July while adding EUR 19 billion of euro-area government bonds and JPY 1.2 trillion of Japanese sovereign debt, the Institute of International Finance said. The shift follows a 75-basis-point widening in the 10-year US-Germany yield spread since mid-June and yen strength after the Bank of Japan’s July rate hike.
Prior to July, US Treasuries had attracted net inflows in 14 of the last 16 months, outpacing both regions. Consensus estimates had expected a modest USD 5 billion rotation; the actual print was nearly six times larger. Year-to-date, euro-area bonds have returned 3.1% in USD terms versus 1.8% for US Treasuries.
Benchmark 10-year Treasury yields rose 3 basis points to 4.28% in immediate response, while German bund yields fell 2 basis points to 2.45% and Japanese government bond yields held steady at 1.05%.