Foreign investors buy $132bn in US securities in May, dump T-bills
Overseas buyers snapped up $132 billion in US assets during May, driven by record equity demand and a strategic shift away from short-term government debt as markets reassess Federal Reserve rate expectations.
Foreign investors acquired $132 billion worth of US securities in May, demonstrating sustained global appetite for American financial assets despite a complex macroeconomic backdrop. According to the Treasury Department’s monthly International Capital report, net long-term foreign purchases reached $1.33 trillion over the 12 months through May. This consistent accumulation highlights the continued dominance of US markets in global portfolio allocation.
The US equity market drove the bulk of the monthly demand, reinforcing the narrative of American market outperformance. Overseas buyers purchased a net $134 billion in US stocks during May alone. This massive single-month injection pushed cumulative foreign equity purchases over the past year to $909 billion, a figure that illustrates how deeply international capital is tied to the ongoing US stock market rally.
Beyond equities, foreign investors continued to expand their exposure to US corporate credit at a robust pace. Net purchases of corporate bonds totaled $52.5 billion in May. Over the past 12 months, overseas buyers have accumulated $449 billion in US corporate debt. This steady demand for corporate paper suggests that international investors are actively hunting for yield in the US private sector.
However, the most significant takeaway for market professionals lies in the nuanced shift within government debt holdings. While demand for longer-dated US government securities remained firmly positive—with net foreign purchases of long-term Treasuries totaling $56.6 billion in May and $290 billion over the past year—investors aggressively shed short-term government debt.
Overseas investors reduced their holdings of US Treasury bills by $43.5 billion during the month. This divergence between long and short-term Treasuries is a critical signal for analysts assessing inflation trends and the potential path of Federal Reserve interest-rate policy. By dumping short-term bills, which are highly sensitive to immediate rate decisions, while buying long-term bonds and equities, foreign capital appears to be positioning for an eventual Fed pivot. The data suggests global investors are looking past current monetary tightness to lock in longer-duration US assets.
