STOCKS | Global Capital Shifts From U.S. Treasuries to U.S. Stocks

According to Sina Finance, Deutsche Bank strategist George Saravelos said foreign investors now prefer U.S. stocks over U.S. Treasuries as interest in U.S. sovereign debt appears to be fading. Saravelos said this is the first time, outside the global financial crisis, that inflows into U.S. equities have exceeded those into fixed income. He cited a Deutsche Bank analysis showing foreign investors' share of U.S. Treasuries has fallen from more than 50% at its peak to about 30%, while their holdings of U.S. stocks have risen. He wrote that foreign investors favor U.S. stocks because the U.S. private-sector balance sheet is booming, driven by artificial intelligence and record profit margins, while the public-sector balance sheet continues to deteriorate, with the fiscal deficit rate likely to remain above 6% for a long time. Last week, concerns over inflation pressure and surging debt spread across global markets, triggering a broader bond selloff. The benchmark U.S. 10-year Treasury yield climbed to its highest level since November 2023, and the 30-year Treasury yield also rose sharply. According to the Congressional Budget Office estimate, total federal debt surpassed $40 trillion in August, while the federal budget deficit for the fiscal year ending September 30 is expected to reach about $2.1 trillion, or more than 6% of U.S. GDP. Norges Bank Investment Management, which manages Norway's Government Pension Fund Global, proposed last week to reduce the fund's U.S. Treasury weighting in its fixed-income benchmark. If approved, the share of U.S. Treasuries in its bond portfolio would fall from about 34.1% to 21.9%. Other major buyers of U.S. Treasuries have also cut purchases this year. As of June, China held about $633.4 billion of U.S. Treasuries, down from $731.4 billion a year earlier. By contrast, foreign holdings of U.S. stocks have reached a record high. Deutsche Bank data showed that over the past year through March 2026, U.S. equities attracted a record $600 billion in net inflows, exceeding investment in government and agency bonds by the largest margin on record. BlackRock has also turned overweight on U.S. stocks and underweight on long-dated U.S. Treasuries, citing strong corporate earnings driven by AI buildout and a favorable macro backdrop. In an August 31 report, BlackRock said the reliability of long bonds as a portfolio diversifier has declined in the new environment.