Canada is emerging as one of the largest foreign holders of US government debt, with Treasury securities attributed to Canadian accounts rising sharply as China’s reported holdings continue to decline.
According to the US Department of the Treasury’s latest Treasury International Capital (TIC) data, released on October 16, 2026, Canada held $464.6 bn in US Treasury securities at the end of August, compared with $426.3 bn in July.
- Canada’s reported US Treasury holdings increased to $464.6 bn in August 2026 from $426.3 bn in July, placing it fifth among foreign holders of American government debt.
- China’s reported holdings declined to $590.7 bn from $618 bn, narrowing the gap with Canada to $126.1 bn. BMO economists suggest Canada could overtake China before 2028.
- Analysts disagree over whether the increase reflects stronger Canadian investment demand or Chinese investors holding US securities through Canadian financial intermediaries.
The $38.3 bn monthly increase brought Canada’s reported holdings closer to those of China, which fell by $27.3 bn to $590.7 bn over the same period.
Canada’s holdings have more than quadrupled from approximately $106 bn in 2021, reflecting growing exposure to American government debt through Canadian financial accounts.
The rapid increase has raised questions about whether the securities are ultimately owned by Canadian investors or by foreign institutions using Canadian custodians.
Canada approaches the world’s largest US Treasury holders
Japan remained the largest foreign holder of US Treasury securities in August 2026, with $1.068 tn, followed by the United Kingdom at $1.010 tn. China ranked third with $590.7 bn, followed by Belgium at $490.5 bn and Canada at $464.6 bn.
Canada’s position has strengthened considerably as China’s reported Treasury holdings have declined from more than $1 tn in 2021.
Doug Porter, chief economist at Bank of Montreal, has suggested that Canada could overtake Belgium and China within approximately 18 months, potentially becoming the third-largest reported foreign holder before 2028.
Such an outcome would leave only Japan and the United Kingdom ahead of Canada. However, the projection depends on future investment flows, security valuations and custody arrangements. The latest rankings do not establish that Canada will necessarily overtake China.
Foreign investors collectively held approximately $9.33 tn in US Treasury securities at the end of August, according to the Treasury Department.
Are Chinese investors moving US Treasuries through Canada?
One possible explanation for Canada’s rising holdings is that Chinese investors are increasingly using Canadian financial intermediaries to purchase or hold American government securities.
US Treasury statistics are subject to what economists describe as custodial bias. Securities held through financial institutions in third countries may be attributed to the location of the custodian rather than the country of the ultimate beneficial owner.
For example, US government bonds beneficially owned by a Chinese institution but held through a Canadian custodian could appear in Treasury statistics as Canadian holdings.
The US Treasury acknowledges that its data cannot always identify the ultimate owners of securities held through international financial intermediaries.
Tiffany Wilding, an economist at Pacific Investment Management Co. (Pimco), noted that China has previously used institutions in other countries, including Belgium, to hold US government securities.
That established practice makes the possibility of Chinese investment through Canadian institutions plausible, although it does not establish that such transactions explain Canada’s recent increase.
Porter has also suggested that China may be maintaining exposure to US Treasuries through alternative investment channels despite the decline in holdings directly attributed to the country.
China’s State Administration of Foreign Exchange does not publicly disclose the complete composition of the country’s official foreign exchange reserves.
Separate Chinese investment statistics showed approximately $1.99 tn in international investments at the end of 2025, including $724.7 bn in foreign debt securities and $198.7 bn in US debt securities within the reported categories. Those figures do not provide a comprehensive breakdown of China’s official reserves or establish the amount of US government debt held through Canadian custodians.
The distinction matters because changes in reported national Treasury holdings cannot, by themselves, demonstrate that securities have been transferred from one country’s investors to another country’s financial institutions.
Higher US bond yields attract Canadian investors
Other economists argue that Canada’s rising Treasury holdings can be explained largely by conventional investment decisions.
Derek Holt, head of capital markets economics at Bank of Nova Scotia, considers the growing yield difference between American and Canadian government debt a more immediate explanation than the possibility of Chinese investment through Canadian accounts.
On October 16, the yield on benchmark 10-year US Treasuries was approximately 5.1%, compared with roughly 3.83% for comparable Canadian government bonds.
The difference of approximately 1.3 percentage points provides an incentive for investors seeking higher nominal returns on government debt.
Canadian pension funds, asset managers, banks and other institutional investors may increase their US Treasury exposure to generate income, diversify portfolios and manage US dollar assets and liabilities.
However, currency movements and foreign exchange hedging costs can reduce or eliminate the apparent yield advantage for Canadian-dollar investors.
Porter has acknowledged that genuine Canadian demand is likely contributing to the increase, even if some holdings ultimately belong to foreign investors.
The competing explanations are not mutually exclusive. Canadian institutions may be purchasing more Treasuries while foreign investors simultaneously increase their use of Canadian custody services.
What Canada’s rise means for US government borrowing
The expansion of Treasury holdings attributed to Canada reflects changing patterns of international investment in US government debt.
For Washington, continued foreign demand for Treasury securities remains an important source of financing for federal borrowing.
For investors, higher Treasury yields have improved potential income from American government bonds, although changes in interest rates and exchange rates continue to create market risks.
Canada’s growing position also illustrates the limitations of treating Treasury rankings as a direct measure of financial influence.
The reported $464.6 bn does not mean the Canadian government itself has lent that amount to the United States. The figure includes securities attributed to Canadian accounts across public and private financial institutions, some of which may act on behalf of investors based elsewhere.
Similarly, China’s declining reported holdings do not necessarily mean that Chinese investors have reduced their total exposure to US government debt by an equivalent amount.
The Treasury’s next TIC release, covering September 2026, is scheduled for November 18. Further monthly data will indicate whether Canada’s reported holdings continue to approach those of Belgium and China, but determining the ultimate ownership of the securities will remain more difficult than tracking their reported location.
