Canadians snapped up U.S. debt in April despite Trump’s tariffs, but the bond selloff tanked its value
From Yahoo Finance: 2025-06-21 04:03:00
Canadians continued to buy U.S. Treasuries despite April’s bond selloff, affecting the value of their holdings. Trump’s tariff threats caused Canadians to ditch American products but not U.S. debt. Canadians purchased $9.2 billion in U.S. government bonds in April, the largest monthly surge since November 2023.
The value of Canada’s overall U.S. debt holdings dropped by $58 billion in April, the largest swing among the top 20 foreign owners. Trump’s tariff turmoil led to a massive bond selloff, keeping long-term yields elevated as the Federal Reserve held interest rates steady in 2025.
The Bank of Canada cut rates by 225 basis points in the past nine months while the Fed held steady at a 4.38% yield for 10-year U.S. Treasuries. Canadians find Treasuries appealing due to higher U.S. interest rates, but hedging against a weakening U.S. dollar is crucial.
Foreign investors account for 30% of the U.S. Treasury market, monitored closely amid Trump’s global trade shifts. The U.S. borrows at favorable rates due to the dollar’s reserve status, but souring foreign interest could lead to higher yields and borrowing costs.
Foreign investors held over $9 trillion in Treasuries in April, slightly down from March. The dollar’s decline was more pronounced than any offloading of Treasuries, as trade affects dollar flow first. Changes in Treasury allocation occur more slowly than currency movements.
Treasury data showed foreign private investors sold long-term U.S. debt in April, while government institutions were net buyers. Recent trends suggest a reversal, with official entities reducing their holdings, sparking concerns about cracks in demand from these investors.
Despite tariff threats and bond selloffs, foreigners, including Canadians, have not dumped U.S. debt. Changes in the allocation of Treasuries occur slowly, driven by trade and tariff uncertainties. Bank of America strategists note visible cracks in demand from official investors, but dumping hasn’t occurred yet.