Core Viewpoint - The rumors regarding foreign capital selling US Treasury bonds are unfounded, as data from the US Treasury's International Capital Movement report indicates that the turmoil in May was not caused by foreign investors [1][2]. Group 1: Market Conditions - In May, global trade tensions eased, with the US's "reciprocal tariff" policy in a 90-day buffer period, leading to a 27.6% month-on-month decline in the US trade policy uncertainty index [1]. - The US government faced increasing criticism of the Federal Reserve, and Moody's downgraded the US's last AAA sovereign credit rating, raising concerns about the Fed's independence and the sustainability of US debt [1]. - The 10-year and 30-year US Treasury yields rose above 4.5% and 5.0%, respectively, with monthly increases of 24 and 26 basis points, resulting in a significant drop in Treasury prices [1]. Group 2: Capital Flows - In April, international capital experienced a net outflow of $146 billion, reversing a net inflow of $171.2 billion in March, coinciding with a 4.4% drop in the dollar index [2]. - In May, the US financial market rebounded, with the S&P 500 index rising 6.1%, leading to a net capital inflow of $311.1 billion, a month-on-month increase of $3.257 billion, marking the third-highest monthly inflow on record [2]. Group 3: Foreign Investment in US Securities - Foreign investors net purchased $318.5 billion in US long-term securities in May, a month-on-month increase of $369.1 billion, contributing 113.1% to the net capital inflow [3]. - Private foreign capital was the main contributor, with a net inflow of $333.2 billion, a month-on-month increase of $330.4 billion, marking the highest monthly net inflow on record [4]. Group 4: Types of Securities - Foreign investors significantly increased their holdings of US Treasury bonds, with net purchases of $1.463 billion in May, a month-on-month increase of $1.871 billion, contributing 50.7% to the net purchases of long-term securities [5]. - Private foreign investors were the primary buyers of US long-term securities, shifting from a net sale of $50.6 billion to a net purchase of $318.5 billion in May [5][6]. Group 5: Country Contributions - Canada was the largest contributor to the net purchase of US long-term securities in May, with a net inflow of $146.7 billion, accounting for 39.7% of the total [9]. - Other significant contributors included the Cayman Islands, Singapore, China, and Japan, with China ending a 10-month streak of net sales to net purchase $3.2 billion in May [10][11].

Core Viewpoint - The attractiveness of dollar assets to Japanese investors has significantly declined, despite Japan not participating in the "sell-off" of U.S. assets [1][10]. Group 1: Capital Flow Reversal - In April, the U.S. experienced a reversal in capital flow, shifting from a net inflow of $253.1 billion in March to a net outflow of $14.2 billion [2]. - Foreign investors sold a net $57.1 billion in U.S. securities in April, compared to a net purchase of $274.3 billion in March, with long-term securities accounting for $50.6 billion of the sales [2][4]. - U.S. investors sold a net $42.8 billion in foreign securities, marking the end of five consecutive months of net purchases [3]. Group 2: Foreign Investment Trends - Official foreign investors sold a net $17.3 billion in U.S. securities, while private foreign investors continued to net buy, albeit at a significantly reduced amount [4][6]. - The primary driver of the capital flow reversal was the substantial decrease in net purchases by private foreign investors [4][6]. - The main focus of foreign selling was U.S. long-term securities, particularly medium- and long-term government bonds, which saw a net sale of $40.8 billion [4][11]. Group 3: Country-Specific Selling Patterns - Canada was the largest seller of U.S. long-term securities in April, with a net sale of $80.8 billion, significantly higher than other countries [7][8]. - China and Mexico also contributed to the selling, with net sales of $23.9 billion and $13.4 billion, respectively [9][10]. - The U.K. and Japan were notable buyers of U.S. long-term securities, with the U.K. purchasing $67.6 billion, indicating a contrasting trend among different countries [10]. Group 4: Sector-Specific Selling - In April, foreign investors net sold $52.8 billion in U.S. government bonds, marking the highest level of net selling since June 2021 [5][11]. - The selling of U.S. equities was primarily driven by official foreign investors, who sold $33.2 billion, while private investors continued to buy [13][14]. - The trend of selling U.S. corporate bonds was also evident, with both private and official foreign investors participating in the sell-off [15].