Turkey Dumped 89% of Its US Bonds in March as Foreign Holdings Fell $139B

Key Takeaways

• Turkey dumped $13.98B in US Treasuries in March, an 89% liquidation in one month, as the lira came under intense pressure from the Iran war
• China cut holdings by $41B to $652B, their lowest since 2008, while Japan sold $48B as foreign holdings fell $139B in March alone
• The $139B March decline was the largest monthly drop since September 2022, with only the UK buying, adding $30B to a record $927B

Turkey spent the last two years building its position in the US national debt market. It increased holdings from roughly $3.4 billion in early 2024 to more than $20 billion at one point this year. In March, this strategy reversed quickly. US Treasury data showed the country cut its holdings to just $1.8 billion as the lira came under pressure during the Iran war, energy prices surged, and volatility spread across global markets. The decline in foreign Treasury holdings has also renewed attention on de-dollarization and the long-term outlook for the US bond market.

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Why Turkey’s $13.98B Dump Is the Biggest Sign Yet That US Debt Is in Crisis

Treasury International Capital data showed Turkey sold about $13.98 billion in US government debt in March alone. Long-term Treasury holdings dropped to under $1 billion, while short-term holdings also declined sharply. In addition, total foreign Treasury holdings fell by $139 billion during the month. Japan reduced holdings by roughly $48 billion, while China cut another $41 billion, bringing its position down to around $652 billion, the lowest level since 2008.

The UK moved in the opposite direction, adding about $30 billion and increasing its total holdings to a record $927 billion. Analysts said some countries were likely selling Treasuries to raise dollar liquidity and support domestic currencies as volatility increased across global markets.

The move happened during a period of intense pressure on the Turkish lira. Rising oil and gas prices increased import costs for Turkey. This remains heavily dependent on energy imports. The central bank reportedly intervened aggressively in currency markets during March, selling foreign reserves and tightening funding conditions to stabilize the lira.

Turkey also reduced its gold reserves during the same period. Several local and international reports said the country drew down roughly 127 tonnes of gold. This is one of the largest reserve declines on record for the central bank.

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De-dollarization Concerns Under Focus

It should be noted that the decline in foreign Treasury holdings has again raised questions around de-dollarization and whether countries are becoming less willing to hold large amounts of US debt.

At the same time, economists note that Treasuries remain among the most liquid assets in the world. This makes them one of the first reserve asset countries to sell during periods of market stress.

Still, with US borrowing needs continuing to rise and Treasury yields remaining elevated, investors are watching foreign demand for US debt more closely than they were a year ago.

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