Foreign investors significantly increased their holdings of U.S. bonds in January, with the average daily purchase volume reaching a three-year high

JPMorgan’s latest market data shows that in the just-concluded January, foreign investors experienced their strongest bond-buying surge in nearly three years. The driving forces behind this wave of allocation are clear: on one hand, U.S. bond yields remain stable; on the other hand, the decline in hedging costs further enhances the attractiveness of U.S. credit assets to foreign capital, accelerating the pace of overseas investment.

Daily purchase volume breaks records, JPMorgan data shows bond-buying enthusiasm reaches new heights

According to JPMorgan strategists, in January, the average daily net purchase of U.S. corporate bonds by foreign investors reached $332 million, the highest since February 2023. This indicates that foreign capital has reached its peak in bond purchases over the past three years, with the intensity of buying significantly surpassing any previous period.

Resilient allocation despite a weakening dollar, foreign investors optimistic about bond value

Interestingly, despite the pressure on the dollar index and currency depreciation typically weakening foreign investors’ purchasing power for dollar-denominated assets, their enthusiasm for U.S. corporate bonds has not cooled. This signals a key point: foreign investors’ confidence in the outlook for the U.S. bond market is strong enough to offset potential exchange costs from dollar depreciation. In other words, regardless of dollar performance, foreign investors remain committed to bond purchases, with no signs of large-scale capital rotation.

This phenomenon indicates that within the global asset allocation landscape, U.S. corporate bonds, with their yield advantages and risk characteristics, have become a key target for foreign capital to increase holdings.