Pressure 03 · Foreign investors
What if foreign investors pull back?
Equal $10 billion contractions produce different 10-year yield responses across reported locations because their maturity holdings and estimated demand schedules differ.
Headline finding
Holdings are global, but equal withdrawals have unequal effects.
Begin with average holdings across all reported locations. The counterfactual tabs then narrow to the 34 reported locations that can support a full $10 billion contraction.
83 locations shown. This descriptive view includes every separately reported country or jurisdiction in the source panel.
Interpretation: The holdings tab is descriptive and covers 83 separately reported countries and jurisdictions. The counterfactual tabs isolate differences in maturity holdings and estimated demand schedules by holding the withdrawal fixed.
Source: Dissecting Treasury Market Resilience, Figure 3 and Appendix Tables A5–A6. Counterfactuals are point estimates for 34 sufficiently large locations; TIC labels reflect reporting residence and custody rather than final beneficial ownership.
Economic interpretation
Size alone does not predict market impact.
The model proportionally scales down each reported location’s full demand curve so that baseline holdings fall by $10 billion. Canada and India provide a sharp comparison: their yield effects differ because their estimated demand schedules differ, even when the dollar amount is held fixed.
Treasury International Capital reports bills and longer-term Treasuries separately. The analysis scales reported bill holdings to represent the under-one-year bucket, then divides longer-term holdings between the intermediate and long buckets using aggregate TIC maturity shares.
How to interpret the experiment
The experiment is a permanent proportional scaling of a reported location’s full demand curve. It does not identify the nationality of the final beneficial owner.
Live policy case
Why did the U.S. Treasury join Japan’s yen intervention?
On July 31, 2026, Japan’s Ministry of Finance and the U.S. Treasury carried out their first coordinated yen-buying intervention since 1998. The yen had weakened beyond ¥163 per dollar, near a four-decade low. Japanese households and businesses faced higher import costs, while officials in both countries were concerned that the speed and disorderliness of the decline could spread instability beyond the currency market.
The New York Fed, acting for the Treasury, reportedly sold euros and bought yen. The U.S. leg therefore supported the yen without selling U.S. Treasuries.
Japan can sell reserve assets, including Treasuries, to raise dollars. It also plans to use the Fed’s FIMA Repo Facility, which would let it borrow dollars against Treasuries without selling them.
If Treasuries are sold, investors must take them onto their balance sheets. The yield effect depends on how much duration reaches the market and whether the sale is expected to reverse.
$73.6 billion of yen support
Before the joint operation, Japan disclosed ¥11.7349 trillion, about $73.6 billion, of yen intervention between April 28 and May 27, 2026. We use that amount to compare four possible financing routes. The comparison does not reconstruct the July 31 trade. The release does not report that Japan sold $73.6 billion of Treasuries.
| Financing route | What reaches the Treasury market | 10-year effect |
|---|---|---|
| FIMA repo financing | No Treasuries reach the market | 0.00 bp |
| U.S. bill issuance | Short-duration supply reaches the market | +0.49 bp |
| Temporary Japanese sale | Longer duration, expected to reverse | +2.62 bp |
| Permanent retrenchment | Longer duration, demand does not return | +4.23 bp |
Interpretation: The July 31 joint intervention and Japan’s earlier $73.6 billion intervention amount are observed. The financing routes in the table are counterfactuals. Repo’s zero is a direct Treasury-market effect by construction, not a statement about the total economic costs of intervention.
Source: Ministry of Finance, Japan, August 3, 2026; Associated Press, August 3, 2026; Axios, August 3, 2026; Foreign Exchange Intervention Operations, May 29, 2026; Dissecting Treasury Market Resilience, Table 2 and Section 3.6.