In June, foreign investors had a total net inflow of $133.5 billion into U.S. financial markets, but during the same period they sold $29.0 billion worth of Treasury bills.
Two sets of data show two distinctly different directions of capital flows within the same month: most incoming funds flowed toward the U.S. stock market, but demand for U.S. government debt weakened significantly. Foreign buyers purchased $181.4 billion worth of U.S. stocks, but only $6.8 billion in long-term Treasury bonds; in the short-term bond segment, they sold off Treasury bills that are often used as a cash reservoir.
This divergence in capital flows also helps explain why stablecoins were included in the U.S. government debt-response strategy. Stablecoin issuers such as Tether and Circle typically allocate most of the reserve assets supporting the value of their tokens to Treasury bills and similar assets. If overseas buyers continue to reduce their holdings of Treasury bills, the rapidly growing stablecoin sector—potentially on a scale comparable to, and with demand power that could rival, overseas capital—may become another significant force. The June data shows that this industry already has a sufficient size, but the recent token-issuance scale is small and cannot by itself account for the $29.0 billion in selling pressure.