Amid concerns that rising yields might deter foreign investors from the US corporate bond market, recent data shows otherwise. Contrary to these fears, international interest in US corporate bonds remains strong, as highlighted by a Goldman Sachs report.
Despite the notable increase in Treasury yields throughout the year, foreign demand has maintained its vigor. Data indicates that by June’s end, net foreign acquisitions of US corporate bonds amounted to $251 billion, suggesting that 2026 could nearly rival last year’s record of $392 billion, according to Goldman Sachs’ analysis.
“This is notable as the foreign appetite for US credit has persisted despite a range of headwinds in recent years, including fluctuations in the strength of the dollar and the cost of hedging,” Amanda Lynam, the chief credit strategist at Goldman Sachs, noted in her recent communication.
Currently, foreign investors hold approximately 29% of the US corporate bond market, underscoring their significant role in sustaining demand. This comes as market participants evaluate the implications of elevated borrowing costs on bonds, especially in light of the Federal Reserve’s upcoming policy decisions.
The 10-year Treasury yield recently closed at 5%, marking its peak since 2007, as expectations grow for prolonged higher interest rates.
Japan’s Position and Market Dynamics
Since the start of 2022, European investors have made up 52% of the net foreign purchases of US corporate bonds, significantly overshadowing Asia’s 21% share. Despite the focus on Japan’s potential investment shifts due to rising domestic bond yields, Lynam believes the broader market can absorb any reductions in Japanese holdings of US bonds.
Even with the upward trajectory of Treasury yields and Japan’s policy changes, Goldman Sachs maintains that few global markets can match the scale and liquidity of the US corporate bond market. Lynam expressed confidence, stating, “We continue to expect a floor to remain under foreign purchases of US-domiciled credit, and view a broader repatriation of flows as unlikely.”
