By Rocky Swift and Vidya Ranganathan

Tokyo/Singapore (Reuters)

As the Trump administration’s “big, beautiful bill” progresses through the U.S. Senate, foreign investors are increasingly incentivized to diversify away from U.S. Treasuries. The bill is expected to add $3.3 trillion to U.S. debt, raising concerns of worsening deficits and inflation-boosting tariffs, leading to a downgrade of the U.S. credit rating by Moody’s.

Toshinobu Chiba, a Tokyo-based fund manager, has shifted from Treasuries to European debt, eyeing bonds from Europe, Australia, and Singapore. Traditionally seen as a safe haven, Treasuries have become volatile as Trump’s unpredictable economic policies make them less attractive to overseas investors.

U.S. Treasury International Capital (TIC) data indicates a net outflow of $14.2 billion from U.S. debt in April. Japan remains the largest external holder of Treasuries, followed by Britain and China. Following tariff news, Treasury yields fluctuated, reflecting investor concerns.

The Senate is expected to pass the controversial spending bill, which could further alarm investors about U.S. finances. Analysts warn that the bill could steepen the Treasury yield curve as investors demand higher returns. Despite concerns, there may not be a drastic sell-off of Treasuries; instead, this trend reflects a long-term diversification strategy among foreign investors, especially in Asia.

Hemant Mishr, CIO of SCUBE Capital, predicts widening U.S. risk premiums, emphasizing that global investors are adapting rather than abandoning U.S. assets altogether.