China's Treasury Pile Is Shrinking on Paper. The Custody Data Tell a Different Story
NEW YORK, Oct. 19, 2026 /PRNewswire/ -- American News Group News Commentary - China held $590.7 billion of U.S. Treasury securities at the end of August, down from $699.7 billion a year earlier, according to U.S. Treasury data released Friday. Fortune called it the lowest level in 18 years, and for anyone watching de-dollarization, the trend looks clear. But over the same year, holdings attributed to Belgium and Canada kept climbing, and a former Treasury official who follows the data says some of China's bonds may simply be sitting in someone else's vault. Companies and funds mentioned in this article include: The Bank of New York Mellon Corporation (NYSE: BNY), State Street Corporation (NYSE: STT), iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT), CME Group Inc. (NASDAQ: CME), SPDR Gold Shares (NYSE Arca: GLD).
Follow the Custodians
The catch is in how the numbers are collected. The Treasury Department gathers the data mainly from U.S.-based custodians and broker-dealers, and U.S. securities held in overseas custody accounts may not be attributed to their actual owners. That leaves room for a country's holdings to show up under the name of whichever financial center is holding them.
Belgium was credited with $490.5 billion of Treasuries in August, up from $451.1 billion a year earlier. Canada held $464.6 billion, up from $444.0 billion, and Fortune noted Canada's total stood at $169 billion five years ago. Brad Setser of the Council on Foreign Relations, a former Treasury official, told Fortune that "it seems likely that China is now using multiple non-U.S. custodians to mask its true holdings." In a post on X, he added that "the evidence that China uses a Canadian custodian for some of its Agencies is especially strong," referring to bonds issued by U.S. federal housing agencies.
The Vault Keepers
That puts a spotlight on the global custody business, where large banks safekeep and service trillions of dollars of securities for central banks, pension funds and asset managers. BNY reported $63.4 trillion in assets under custody and/or administration at Sept. 30, up 10% from a year earlier, as third-quarter revenue rose 12% to $5.7 billion and diluted earnings per share climbed 24% to $2.34. "BNY delivered strong results in the third quarter," CEO Robin Vince said in the Oct. 15 release. The shares rose 0.41% last week, from $142.71 at the Oct. 9 close to $143.30 on Oct. 16, according to Stock Analysis data.
State Street reported $59.2 trillion in assets under custody and/or administration at the end of the third quarter, up 14.5% from a year earlier, with assets under management up 15.8% to $6.3 trillion. Revenue rose 12.9% to $4.0 billion and diluted earnings per share rose 32.7% to $3.69. Even so, the shares fell 4.14% on Oct. 14, the day the results came out, and finished the week down 5.28% at $165.72.
Bills Over Bonds
Fortune also reported that China has reduced its long-term Treasuries while increasing short-term bills. Across all foreign holders, the picture in August was mixed. Total foreign holdings of Treasuries rose to $9.33 trillion from $9.25 trillion a year earlier, and foreign investors made $300.7 billion of net purchases of long-term U.S. securities in the month, even as they cut their holdings of Treasury bills by $47.8 billion. Japan remained the largest holder at $1.07 trillion, followed by the United Kingdom at $1.01 trillion.
Long bonds rallied last week. The iShares 20+ Year Treasury Bond ETF, which holds about $47 billion in assets, rose 2.65% from $77.98 to $80.05.
The trading activity around government debt has been heavy. CME Group reported record third-quarter average daily volume of 29.4 million contracts, up 16% from a year earlier, including record interest rate volume. U.S. Treasury futures and options averaged 9.4 million contracts a day in the quarter, up 25%, and 9.5 million in September, up 42%. CME shares gained 4.74% last week to $293.87.
CONTINUED... Read more market coverage at: americannewsgroup.com
The Gold Hedge
Part of the story is diversification. U.S. sanctions against Russia after its 2022 invasion of Ukraine encouraged the People's Bank of China and other central banks to move away from dollar reserves and toward alternatives such as gold, Fortune reported. In September, the People's Bank of China added to its gold reserves for a 23rd consecutive month, its largest monthly purchase since September 2023.
For investors who want gold exposure without a vault, the SPDR Gold Shares fund holds about $141 billion in assets and charges a 0.40% expense ratio. It slipped 0.67% last week, from $384.58 to $382.01, after rising 1.79% on Oct. 15.
Meanwhile, China's trade surplus keeps growing. Its customs agency reported a trade surplus of $938.1 billion for the first nine months of 2026, including $133.5 billion in September alone, as exports jumped 36.3% from a year earlier, the Associated Press reported. That followed a 2025 surplus of $1.2 trillion, the largest in recorded history, according to Fortune. Setser estimates that U.S. financial assets still make up 50% to 55% of China's reserve portfolio.
Bond, gold and bank charts tell this story in real time. Learn to read them with the free Stock Preachers guide, plus The Roadmap market reports, at stockpreachers.com.
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