Foreign investors are abandoning U.S. Treasurys at an accelerating pace, reallocating capital to equities in a historic reversal that underscores deepening skepticism about the U.S. public balance sheet.

Foreign ownership of U.S. Treasurys has collapsed from above 50 percent to roughly 30 percent, while overseas equity holdings have reached all-time highs, according to Deutsche Bank analysis published this summer. The U.S. attracted a record $600 billion in net equity inflows in the year to March 2026—outweighing bond inflows by the largest margin on record.

"This is the first time outside of the Global Financial Crisis that equity inflows into the United States have surpassed fixed income allocations," said George Saravelos, global head of FX research at Deutsche Bank.

“"This is the first time outside of the Global Financial Crisis that equity inflows into the United States have surpassed fixed income allocations," said”

Saravelos attributed the pivot to a booming American private sector, fueled by artificial intelligence deployments and record corporate profit margins, contrasted against a deteriorating public sector. The Congressional Budget Office projects the federal budget deficit will reach $2.1 trillion for the fiscal year ending Sept. 30, exceeding 6 percent of U.S. GDP. The national debt topped $40 trillion last month.

Treasury yields have spiked sharply as foreign demand crumbles. The 10-year yield breached 5 percent, and the 30-year yield has moved sharply higher—the 10-year hitting its highest level since November 2023. The yield surge has weighed on stock futures.

Major institutional buyers are scaling back. Norges Bank Investment Management, which runs the world's largest sovereign wealth fund, has proposed cutting U.S. Treasurys from 34.1 percent to 21.9 percent of its fixed-income benchmark. China reduced its Treasury holdings to $633.4 billion as of June, down from $731.4 billion a year earlier.

BlackRock has positioned itself for the rotation, holding an overweight in U.S. equities and an underweight in long Treasurys. The firm said in an Aug. 31 note that long-duration bonds are a less reliable portfolio diversifier in the current market regime, citing strong corporate earnings from the AI buildout and a supportive macro backdrop for stocks.