According to the Financial Post, Canada’s reported holdings of US Treasury securities and federally backed mortgage bonds have grown to nearly US$600 billion, more than quadrupling its position in five years. This increase comes even as China’s official Treasury stake has fallen to US$618 billion, roughly half of what it held before Donald Trump’s 2016 campaign began criticising the country. The article notes that China’s reported ownership of agency mortgage‑backed securities has also dropped by almost 50 % since the start of 2024.
The piece quotes Vitaliy Liberman of DoubleLine, who monitors foreign ownership of US debt. Liberman said he was struck by the rapid rise in Canada’s stockpile despite a broader boycott of US goods in the tit‑for‑tat tariff war. When he asked colleagues about the anomaly, the response was consistent: “The smartest people on the Street said, ‘It’s not Canada. It’s the other Canada,’” he explained, adding that “the other Canada” refers to China.
Several investors, analysts and Wall Street strategists told the publication that the Canadian tally suggests a tactic that obscures the Treasury Department’s figures and masks how important China remains to financing the US deficit. They theorise that Chinese officials have moved their holdings to non‑US custodian banks in other countries, so the bonds are not recorded as Chinese in official data. This practice would also let Beijing appear to be reducing its dollar flows while still maintaining a large portfolio.
The article links the trend to broader market pressures. It notes that the inflation shock from the Iran war has pushed US long‑term borrowing costs to their highest level in almost a quarter‑century, heightening concerns about the world’s willingness to absorb the ever‑growing supply of debt needed to cover the US$2 trillion federal deficit.
Brad Setser, a former US Treasury official who has long tracked the department’s data, is quoted as saying, “The story here is that China has been much better at hiding its dollars than it’s been about getting out of the dollar.” Alicia Garcia‑Herrero, chief economist for Asia Pacific at Natixis, warned that large‑scale sales would crystallise mark‑to‑market losses, push the yuan higher and leave China with the problem of where to park its dollars.
Not all observers attribute the jump solely to China. Nick Travaglino, head of securitized credit at Nuveen Asset Management, said Canadian mortgage buying has not been a topic of conversation among major investors. Alex Etra, a senior macro strategist at Vanda Research and former New York Fed economist, cautioned that the increase could reflect relative‑value trades by Canadian hedge funds rather than a deliberate Chinese maneuver, adding, “I’m not quite comfortable saying clearly this is all China.”
The piece also recalls similar speculation that began in 2014 when Belgium’s reported Treasury holdings surged, a move many market participants again linked to China. While there is no direct evidence tying the rise in Canada’s holdings to banks acting on China’s behalf, the article notes that both the Office of the Superintendent of Financial Institutions in Canada and the US Treasury Department declined to comment on the matter.