Foreign Investors Sell $29B in T-Bills as Stablecoins Hold $140B

The Treasury International Capital report for June shows foreign investors sold $29 billion of U.S. Treasury bills while sending a net $133.5 billion into U.S. securities and banking assets, mostly into equities. Foreign buyers purchased $181.4 billion of U.S. equities and $6.8 billion of long-term Treasuries.

The headline net reflects offsetting flows, including $34.4 billion in bank balance-sheet outflows and U.S. purchases of foreign securities. Short-term Treasury holdings by foreigners fell from about $1.430 trillion in May to $1.400 trillion in June, a roughly 2% drop.

Foreign holders reduced short-term bill positions by $43.5 billion in May and $29.0 billion in June, a two-month decline of about $72.5 billion. The TIC data record securities through custodians and do not identify the motives behind the sales.

Treasury bills are used as cash equivalents because they can be sold quickly. Central banks, companies, money-market funds and stablecoin issuers commonly hold bills and closely related repurchase agreements.

Stablecoin issuers invest customer deposits in assets that can be liquidated rapidly. When a buyer exchanges dollars for a stablecoin, the issuer typically places the backing funds in short-term Treasuries or repo, which creates reserve demand for those assets.

Legislation and proposed Treasury rules provide a framework for regulated payment stablecoins to hold liquid reserves. The GENIUS Act and a Treasury proposed rule on Aug. 17 list cash, short Treasury obligations and certain repurchase agreements as eligible reserve assets.

Issuer disclosures show scale. Tether’s second-quarter attestation listed $114.96 billion of direct Treasury bills and $25.62 billion in overnight and term repo. Circle’s USDC backing sits largely in the Circle Reserve Fund, a government money-market fund managed by BlackRock that can hold cash, short-dated Treasuries and overnight repo.

The total stablecoin market was near $302.1 billion on Aug. 21. Tether reported $184.6 billion of USDT in circulation at the end of the second quarter, about $446 million more than at the end of the first quarter.

The June $29 billion sale cannot be directly matched to new stablecoin issuance because overall token supply changed little in the quarter. Public data do not show a direct transfer from foreign holders of bills to stablecoin issuers.

Stablecoin reserve flows can increase demand for short-term Treasuries when token circulation grows. Redemptions can create selling pressure if issuers need to free cash by selling bills or allowing them to mature.

The next TIC report covering July is due on Sept. 16. Key items to watch in future TIC releases include foreign holdings of short-term Treasuries, changes in total stablecoin circulation and disclosed bill positions at major issuers. Custody reporting differences may limit precise matches between TIC figures and issuer disclosures.

In June, foreign investors increased holdings of U.S. equities while trimming the shortest-dated government paper. Stablecoin issuers disclosed more than $100 billion of short-term Treasuries and related repo.