Overseas investors now favor U.S. stocks over Treasurys in what strategists say is a historic shift, as foreign appetite for American sovereign debt appears to sour. “For the first time ever outside of the GFC, equity inflows into the U.S. have overtaken fixed income,” George Saravelos, global head of FX research at Deutsche Bank, said in a note Thursday. Saravelos pointed to Deutsche analysis published earlier in the summer that indicates the share of U.S. Treasuries now held by overseas investors has tumbled from more than 50% at its peak to about 30% today. Holdings of U.S. equities, in contrast, have moved higher. “Why do foreigners love U.S. equities but dislike U.S. bonds? Because the American private balance sheet is booming — AI, record profit margins — but the public sector balance sheet keeps worsening (6%+ deficits until the eye can see),” Saravelos wrote. US10Y 5Y mountain U.S. 10-Year Treasury. Investor concerns over inflation pressures and spiraling government debt spilled over into a broader global bond sell-off this week. Yields on the benchmark U.S. 10-year Treasury note reached their highest level since November 2023 , while the 30-year note yield also moved sharply higher. U.S. national debt topped $40 trillion last month, while the federal budget deficit is projected to hit about $2.1 trillion in the fiscal year ending September 30 — more than 6% of U.S. GDP, according to Congressional Budget Office estimates. Norges Bank Investment Management — which manages Norway’s Government Pension Fund, the world’s largest sovereign wealth fund — has proposed reducing the share of government bonds in the fund’s fixed-income benchmark. If adopted, the change would reduce U.S. Treasurys from about 34.1% to 21.9% of its bond portfolio. Other major buyers of U.S. government debt have also scaled back their purchases this year. China held about $633.4 billion of U.S. Treasurys as of June this year, down from $731.4 billion a year prior. In contrast, foreign ownership of U.S. equities has reached all-time highs, with the U.S. drawing a record $600 billion of net equity inflows in the year to March 2026 — outweighing investments in government and agency bonds “by the largest margin in history”, Deutsche said. Highlighting the pivot, fund management giant BlackRock is currently overweight U.S. equities — highlighting strong corporate earnings fueled by the AI buildout and a favorable macro backdrop — and underweight long U.S. Treasurys. “Long-duration bonds… are a less reliable portfolio diversifier in the new regime,” BlackRock wrote in a 31 Aug. note.
Treasurys are losing foreign appeal in a historic capital flow reversal — and here’s one trade investors favor instead
Sep 7, 2026
