{"id":634050,"date":"2026-10-18T05:10:17","date_gmt":"2026-10-18T05:10:17","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/634050\/"},"modified":"2026-10-18T05:10:17","modified_gmt":"2026-10-18T05:10:17","slug":"canada-on-track-to-become-a-top-three-holder-of-u-s-government-debt-surpassing-china","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/634050\/","title":{"rendered":"Canada on track to become a top-three holder of U.S. government debt, surpassing China"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Roughly US$426-billion worth of U.S. treasury securities are currently held in Canadian accounts.Matt Rourke\/The Associated Press<\/p>\n

Canada has quietly become one of America\u2019s biggest creditors, with the country on track to surpass China as a top-three holder of U.S. government debt before 2028.<\/p>\n

Roughly US$426-billion worth of U.S. treasury securities are currently held in Canadian accounts, up more than 300 per cent from US$106-billion in 2021. Bond market experts say part of that increase is simply the result of Canadian investors snapping up more treasuries as the interest rates, or yield, they offer has grown.<\/p>\n

But the data includes all treasuries held in Canada-domiciled accounts, regardless of who owns them. That means Canadian holdings of U.S. treasuries can be controlled not only by domestic governments, institutions and individuals, but also by foreign entities. This has led some experts to believe Canada\u2019s rapid rise in the ranks of U.S. creditors is at least partly a result of China moving its U.S. government debt holdings into Canadian-domiciled accounts, where it can retain control of the assets even as they are formally attributed to Canada.<\/p>\n

Officially, Chinese holdings of U.S. treasuries have plummeted roughly 40 per cent to barely US$600-billion from more than US$1-trillion in 2021. However, China is widely known to use intermediaries in other countries \u2013 most notably Belgium \u2013 to hold treasuries, according to Tiffany Wilding, an economist at Pacific Investment Management Co. (Pimco).<\/p>\n

\u201cThere is a background there that could suggest China certainly could have an intermediary take a treasury position in Canada,\u201d Ms. Wilding said in an interview. <\/p>\n

It is impossible to know for sure whether China is the driving force behind the rising U.S. treasury holdings in Canada. That is partly because the data itself suffer from \u201ccustodial bias<\/a>,\u201d where holdings are attributed to the country where the assets are held, as opposed to the country where the ultimate owner of those assets are based.<\/p>\n

The possibility of China being the source of this activity makes it additionally challenging to confirm. While the country\u2019s State Administration of Foreign Exchange (SAFE) releases breakdowns by country of international investments of its banks, non-bank financial institutions and the non-financial sector, details of the government\u2019s official foreign exchange allocations are considered a state secret.<\/p>\n

SAFE data showed that the China\u2019s international investments totalled US$1.99-trillion at the end of 2025. Chinese investment in foreign debt securities stood at US$724.7-billion, of which US$198.7-billion were U.S. debt securities. <\/p>\n

With Chinese bonds yielding far less than their U.S. equivalents \u2013 the yield on 10-year Chinese government bonds stood at 1.66 per cent on Friday, compared with a 5.11 per cent yield on the U.S. 10-year bond \u2013 there is a disconnect between the drop in China\u2019s official holdings and the strong demand for U.S. bonds in China. <\/p>\n

Suddenly, bonds are reclaiming their status as a safe haven<\/a><\/p>\n

A Shanghai-based asset manager, who The Globe agreed not to name because he is not authorized to speak publicly, said the spread between U.S. and Chinese yields is a driver for asset managers to seek every tunnel to get access to the U.S. bond market. <\/p>\n

China\u2019s involvement \u201chelps explain a lot of what is going on,\u201d said Doug Porter, chief economist at Bank of Montreal, who noted Canada was on pace to surpass China as a U.S. treasury holder in a report published in late August.<\/p>\n

Canadian holdings of U.S. treasuries are set to eclipse those of Belgium and China within 18 months, his report said, at which point only Japan and Britain will possess larger reserves of U.S. government debt.<\/p>\n

\u201cChina is still investing in treasuries, just through other avenues,\u201d Mr. Porter said in an interview. \u201cI think a lot of people had long suspected that. What is interesting is that some of that is being done through Canada.\u201d<\/p>\n

Why China would want to obscure the true state of its U.S. treasury holdings is an open question. There could be political reasons, such as a desire to give the impression that China\u2019s U.S. holdings are being reduced in response to continuing trade tensions. <\/p>\n

Chinese law also classifies any plans to adjust foreign reserves, not just their overall composition, as a state secret. That would be a natural motivation to prevent any foreign entity \u2013 such as the U.S. Treasury Department \u2013 from accurately tracking the buying and selling of the country\u2019s U.S. treasury holdings.<\/p>\n

Hedge funds pose greater threat to U.S. Treasuries than China ever did<\/a><\/p>\n

Whatever the reason, China would likely not be violating any laws by purchasing U.S. securities through intermediaries around the world.<\/p>\n

\u201cThere is nothing nefarious here, it is just not through the traditional channels, and perhaps they don\u2019t want to be seen as holding U.S. treasuries,\u201d Mr. Porter said.<\/p>\n

Some of the increase in Canadian holdings, he said, can be explained straightforwardly by investors who are actually based here buying more U.S. treasuries.<\/p>\n

\u201cThere is some fundamental increased investment in U.S. treasuries by Canadian investors too. I think some of it is real,\u201d he said.<\/p>\n

\u201cSome of the really large investors in Canada are looking at the kind of spreads they can get in the U.S. versus Canada, for instance.\u201d<\/p>\n

Derek Holt, head of capital markets economics at Bank of Nova Scotia, said in an e-mail that he was disinclined to believe China was the root cause of Canada\u2019s climb up the U.S. foreign creditor ladder.<\/p>\n

What is a more plausible explanation, he said, is the growing yield spread between U.S. treasuries and Canadian government bonds. Yield spread refers to the difference in expected return between two bonds with the same maturity. For example, the current yield for a Canadian government 10-year bond is roughly 1.25 percentage points lower than 10-year U.S. treasury notes, meaning buying the American security will generate a higher return.<\/p>\n

\u201cI\u2019m not saying that I dismiss the China argument that it is spreading its holdings around,\u201d Mr. Holt said. \u201cBut I wouldn\u2019t have gone there first for plausible explanations of what we\u2019ve seen.\u201d<\/p>\n

Pimco\u2019s Ms. Wilding said another possible explanation for the rise in Canada\u2019s U.S. treasury holdings is buying activity from Canada\u2019s eight largest pension funds, known collectively as the Maple 8. Only two members of that group, the Ontario Teachers\u2019 Pension Plan and the Caisse de d\u00e9p\u00f4t et placement du Qu\u00e9bec, publicly disclose their U.S. treasury investments.<\/p>\n

The Caisse has doubled<\/a> its holdings of U.S. treasuries to nearly $28-billion at the end of 2025 from roughly $14-billion at the end of 2021. OTPP data show its own positions have remained relatively unchanged. The other five major pension funds either declined to comment on their U.S. treasury holdings or did not respond.<\/p>\n

\u201cThe OTPP data is a reasonable bellwether for the rest of the Maple 8 system, which suggests that they were not the ones to do this,\u201d Ms. Wilding said.<\/p>\n

\u201cWe are kind of scratching our heads on who it could be.\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Roughly US$426-billion worth of U.S. treasury securities are currently held in Canadian accounts.Matt…\n","protected":false},"author":2,"featured_media":634051,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[276,261,277,251,249,278,138,275,248,268,269,264,250,247,219,84,273,267,259,289,252,253,266,262,263,256,279,257,284,111,285,139,287,282,286,69,280,283,254,271,272,135,270,281,260,145,274,265,258,255,288],"class_list":["post-634050","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-new-zealand","tag-newfoundland-and-labrador","tag-newzealand","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-nz","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/634050","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=634050"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/634050\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/634051"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=634050"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=634050"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=634050"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}