Foreign Investors Favor U.S. Stocks Over Treasurys as Bond Demand Weakens

According to CNBC, overseas investors are now favoring U.S. stocks over Treasurys, with Deutsche Bank strategist George Saravelos saying equity inflows into the U.S. have overtaken fixed income for the first time outside the global financial crisis. He said the share of U.S. Treasurys held by overseas investors has fallen from more than 50% at its peak to about 30% today, while holdings of U.S. equities have risen. Saravelos attributed the shift to stronger private-sector balance sheets, including AI and record profit margins, alongside worsening public finances and deficits above 6% of GDP. The move comes as yields on the benchmark U.S. 10-year Treasury note climbed to their highest level since November 2023 and the 30-year yield also rose sharply amid concerns over inflation and government debt. U.S. national debt topped $40 trillion last month, and the federal budget deficit is projected to reach about $2.1 trillion in the fiscal year ending September 30, according to Congressional Budget Office estimates. Norges Bank Investment Management has proposed cutting the share of government bonds in its fixed-income benchmark, which would reduce U.S. Treasurys from about 34.1% to 21.9% of its bond portfolio if adopted. China held about $633.4 billion of U.S. Treasurys as of June, down from $731.4 billion a year earlier. Deutsche said 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. BlackRock is also overweight U.S. equities and underweight long U.S. Treasurys, saying long-duration bonds are a less reliable portfolio diversifier in the new regime.