Foreign investors shift focus to US stocks over Treasuries in historic reallocation

For decades, the playbook was simple: foreign money flows into America, it parks in Treasuries. That script is being rewritten.

According to Deutsche Bank’s analysis of US Treasury International Capital data, foreign inflows into US stocks have averaged 2.8% of GDP over the year through June 2026, compared to just 2% for Treasuries. It’s the first time this century that equity purchases have consistently outpaced government bond buying, outside the brief disruptions caused by the 2008 financial crisis and the pandemic.

The numbers behind the shift

Deutsche Bank’s George Saravelos called it a “huge shift in US asset markets.”

US national debt blew past $40 trillion in August 2026. The 10-year Treasury yield climbed above 5% around mid-September 2026, a level it hadn’t touched since 2023. The 30-year yield pushed even higher, reaching 5.32% after starting the year closer to 4.83%.

Why equities are winning the tug of war

Foreign holdings of US Treasuries stood at roughly $9.3 trillion as of June 2026, representing about 30-32% of publicly held debt. Meanwhile, private foreign investors have been the primary engine behind recent equity demand, while official institutions like central banks and sovereign wealth funds have been steadier or, in some periods, net sellers.

Saravelos framed it neatly: private sector balance sheets are flourishing while public fiscal health deteriorates.

What this means for markets

That’s a meaningful change for anyone trading currencies or managing international portfolios. A dollar driven by equity sentiment is a dollar that could strengthen during risk-on environments and weaken during selloffs, essentially the opposite of its historical safe-haven pattern during moments of stress.

Higher yields feed back into the deficit through increased interest costs. With the 10-year above 5% and the 30-year at 5.32%, the interest expense on $40 trillion in debt is already consuming a growing share of federal revenue.

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