Foreign capital continued to flow into U.S. markets in June, but the money was directed overwhelmingly toward equities rather than the short-term Treasury bills that underpin much of the dollar-based stablecoin reserve system. Treasury Department data showed a net $133.5 billion inflow into U.S. financial assets, led by $181.4 billion of foreign purchases of U.S. stocks, while overseas holders sold a net $29 billion of Treasury bills.
The split leaves a clear gap between demand for U.S. corporate risk assets and demand for the government debt most commonly used as a cash-equivalent reserve. Foreign purchases of long-term Treasuries reached only $6.8 billion during the month, according to the Treasury International Capital, or TIC, report.
Foreign holdings of short-term Treasury bills fell to roughly $1.40 trillion in June from about $1.43 trillion in May. The decline followed a $43.5 billion reduction in May, bringing the combined two-month fall to approximately $72.5 billion.
Equity demand outweighed Treasury bill buying
The TIC report measures cross-border transactions in securities alongside short-term banking flows. Its $133.5 billion headline inflow was substantially below the value of foreign stock purchases because several other categories moved in the opposite direction.
Foreign sales of Treasury bills removed $29 billion from the total, while banking and balance-sheet items recorded a $34.4 billion outflow. Purchases of foreign securities by U.S. residents also reduced the net figure.
The June data therefore does not indicate a broad retreat from U.S. assets. Foreign buyers added heavily to U.S. equities, even as they trimmed positions in the shortest-maturity segment of the government debt market.
Treasury bills mature in one year or less and are widely used by central banks, money-market funds, corporations and stablecoin issuers to manage liquidity. Their short maturity makes them easier to turn into cash without taking the interest-rate risk associated with longer-dated bonds.
The TIC figures do not identify who sold the bills or why. Country-level data also has limitations because transactions are recorded through custodians, meaning the location reported in the data may differ from the location of the ultimate holder.
Stablecoin reserves remain tied to bill markets
The Treasury bill selloff has drawn attention because stablecoin issuers have become substantial holders of short-term U.S. government debt. Dollar-pegged tokens must generally maintain assets that can be converted into dollars quickly when users redeem tokens.
Cash, Treasury bills and repurchase agreements are common instruments for that purpose. A repurchase agreement, or repo, is a short-term secured lending transaction that can provide cash-like liquidity when backed by U.S. government securities.
The GENIUS Act’s framework for regulated payment stablecoins requires issuers to hold high-liquidity reserve assets. A Treasury Department proposed rule released on Aug. 17 identified cash, short-term U.S. government debt and related repo transactions among the preferred eligible reserve assets.
Tether’s second-quarter attestation reported $114.96 billion of direct Treasury bill holdings, as well as $25.62 billion in overnight and term repurchase agreements. The company’s disclosed direct bill position was nearly four times the $29 billion in net foreign Treasury bill sales recorded in June.
That comparison does not establish that Tether, Circle or another stablecoin issuer purchased bills from foreign sellers. The TIC reporting system cannot trace a specific Treasury transaction to a stablecoin reserve portfolio, and it cannot show a direct transfer of securities between overseas holders and issuers.
Circle’s USDC reserve structure also provides exposure to short-duration government debt. The company says most USDC reserves are held in the Circle Reserve Fund, a government money market fund managed by BlackRock that holds cash, short-term Treasury bills and overnight Treasury repos.
Token supply provides little evidence of large new bill demand
Available stablecoin supply data does not indicate that substantial new token issuance absorbed the June reduction in foreign Treasury bill holdings.
Tether reported USDT circulation of $184.6 billion at the end of the second quarter, an increase of about $446 million from the end of the first quarter. That expansion was far smaller than the $29 billion monthly decline in overseas bill positions.
DefiLlama, a blockchain data platform, estimated the total stablecoin market at about $302.1 billion on Aug. 21, down 0.14% over the preceding 30 days. The market-wide figure points to limited net growth in dollar-pegged token supply over that period.
Paolo Ardoino, chief executive officer of Tether, said during a public update that the company added more than 30 million users globally during the second quarter. User growth can occur without an equivalent increase in outstanding token supply, particularly when activity involves transfers between existing holders rather than new deposits into the stablecoin system.
The distinction matters for Treasury demand. Stablecoin issuers need to add reserve assets when their circulating supply grows, while large redemptions can require them to raise cash by selling bills, using repo markets or allowing securities to mature. The same reserve mechanism can therefore add to or reduce demand for short-term government debt depending on whether tokens are being created or redeemed.
Reserve cushions face closer scrutiny
KPMG’s recent financial review of Tether reported that the company held a $6.8 billion excess reserve cushion at the end of last year, falling to roughly $4.1 billion by mid-2026. The reduction reflected losses associated with volatile digital-asset holdings, including Bitcoin, according to the review.
An excess reserve cushion sits above the assets needed to match tokens in circulation. It is separate from the core reserve requirement, but it can affect how much room an issuer has to absorb losses without drawing on backing assets.
Tether’s scale gives its reserve management particular relevance to Treasury markets. Industry metrics cited in the supplied data place the largest dollar-pegged token above 60% of the fiat-backed stablecoin market, concentrating a large share of reserve demand within a small number of issuers.
The next TIC report, scheduled for Sept. 16, will provide data for July. Foreign holdings of Treasury bills and changes in stablecoin supply will remain closely watched, though the structure of custodial reporting means the two datasets cannot be matched transaction by transaction.
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