U.S. Portfolio Inflows Remained Stable in March, with Bonds Gaining Appeal

Overview

This report is a regular high-frequency data tracking note published by Nomura’s FX Strategy team, analyzing March U.S. Treasury International Capital (TIC) data and early-May fund flow updates. Key findings include: despite a slight month-over-month decline in total inflows in March, U.S. bonds remained resilient with increased inflows; meanwhile, high-frequency data suggests renewed foreign interest in U.S. assets in May, though emerging market fund appeal has weakened. By tracking investment behavior across regions, the report reveals dynamic allocation shifts between risk and safe-haven assets.

Core views

Net inflows into U.S. portfolio assets totaled $95 billion in March, down about 4% from February’s $99.5 billion but still $13.17 billion above the 2025 monthly average. A clear divergence emerged in composition: bond inflows rose to $84 billion from February’s $75.5 billion (+$8.4 billion), while equity inflows fell sharply to $10.9 billion from February’s $23.9 billion. This shift reflects international investors’ reallocation away from risk assets following the U.S.-Iran conflict outbreak on February 28, seeking safety in bond markets. Regionally, investor behavior varied significantly. Asia ex-Japan (AeJ) recorded net purchases of $13.6 billion in U.S. assets, led by Singapore ($37 billion) and Hong Kong ($14.3 billion); however, China, India, and Indonesia were net sellers of $23.1 billion, $8.9 billion, and $4.2 billion respectively. Among G10 countries, the UK (+$17.7 billion) and Australia (+$9.8 billion) were notable buyers, while Japan sold $20.3 billion of U.S. portfolio assets. Offshore tax havens reported strong net purchases of $72.8 billion, rebounding sharply from February’s -$0.7 billion, including $32.6 billion in equities and $40.2 billion in bonds. Notably, while AeJ as a whole bought $13.6 billion of U.S. assets, its internal structure was complex: it purchased $20.1 billion of U.S. equities but sold $6.5 billion of bonds. The latter largely reflects central bank interventions to stabilize currencies amid geopolitical shocks. High-frequency data further indicates improving liquidity. In the week of May 15–21, foreign investors net bought $1.3 billion of U.S.-focused funds, with $749 million into equity funds and $538 million into bond funds. Cumulative net inflows from May 1–21 reached $6.5 billion, already exceeding April’s full-month total of $3.2 billion, signaling recovering interest in U.S. assets. Conversely, emerging market-focused funds saw only $2 billion inflows during the same period, far below April’s $6.3 billion, reflecting declining relative appeal.

Analysis framework

The report employs a multi-layered framework to analyze international capital flows. First, official TIC data (from the U.S. Treasury) captures large-scale cross-border investment trends on a monthly basis, revealing macro patterns. Second, daily/weekly fund flow data from non-U.S. exchanges (sourced from Bloomberg and KSD) serves as a real-time proxy to mitigate TIC’s lag, helping anticipate subsequent monthly trends. Third, flows are segmented by investor type and geography to distinguish behavioral patterns among central banks, institutions, and retail investors, as well as regional risk preferences. This methodology rests on a key assumption: U.S.-focused funds listed outside the U.S. are primarily purchased by non-U.S. investors, making them effective proxies for foreign capital flows. The analytical logic follows this chain: geopolitical shock (U.S.-Iran conflict) → shifts in market risk sentiment → reallocation between equities and bonds → heterogeneous responses across regions and investor types. By comparing monthly TIC data with weekly high-frequency fund flows, the report assesses whether market sentiment is recovering week-by-week and how relative attractiveness is shifting across asset classes (equities vs. bonds) and markets (U.S. vs. emerging markets).

Methodology notes

• Macroeconomic framework

  Tracking International Capital Flows and Risk Asset Allocation

  By combining official TIC data with high-frequency fund flow indicators, the report tracks international investors’ allocation choices between U.S. bonds and equities, reflecting shifts in global risk appetite and safe-haven demand. During geopolitical shocks, capital typically rotates from equities to bonds or from emerging markets to U.S. safe assets.

• Event-Driven and Behavioral FinanceEvent-driven analysis

  Short-Term Impact of Geopolitical Shocks on Investment Flows

  The U.S.-Iran conflict erupted on February 28; the report observes rising bond inflows and falling equity inflows in March—a classic risk-off reaction. High-frequency data further shows gradual recovery in risk appetite by May.

• Industry/ Sector Analysis FrameworkSupply-demand framework

  Dynamic Matching of Cross-Border Capital Supply and U.S. Asset Demand

  The report tracks net buying/selling by region (supply side) and the relative appeal of U.S. bonds/equities (demand side). Imbalances can drive price changes—for example, Asian central bank bond sales may push up U.S. Treasury yields.

Key data

• March Net Inflows into U.S. Portfolio Assets$95 billionDown 4% MoM (Feb: $99.5B), but $13.17B above 2025 monthly average
• March Bond Inflows$84 billionUp 9% MoM (Feb: $75.5B), reflecting safe-haven demand
• March Equity Inflows$10.9 billionDown 54% MoM (Feb: $23.9B), indicating lower risk appetite
• Singapore’s Net Purchases of U.S. Assets in March$37 billionLargest buyer in Asia-Pacific
• Hong Kong’s Net Purchases of U.S. Assets in March$14.3 billionSecond-largest buyer in Asia-Pacific
• China’s Net Sales of U.S. Assets in March$23.1 billionLargest seller in Asia-Pacific
• Japan’s Net Sales of U.S. Portfolio Assets in March$20.3 billionOnly major seller among G10
• Offshore Tax Havens’ Net Purchases in March$72.8 billionSharp rebound from Feb’s -$0.7B; includes $40.2B bonds and $32.6B equities
• Foreign Net Purchases of U.S.-Focused Funds (May 15–21)$1.3 billionEquities: $749M; Bonds: $538M
• Cumulative Foreign Net Purchases of U.S.-Focused Funds (May 1–21)$6.5 billionAlready exceeds April’s full-month total of $3.2B
• Cumulative Net Inflows into EM-Focused Funds (May 1–21)$2 billionWell below April’s $6.3B, indicating weaker appeal
• Korean Retail Investors’ Net Sales of U.S. Assets (May 16–22)$657 millionSecond consecutive month of net sales; equities sold: $905M; bonds bought: $249M
• Taiwanese Investors’ Net Purchases of USD Bonds (May 1–21)$346 millionReversal from prior week’s net sales of $342M

Impact & implications

The report’s observations carry several market implications. First, the resilience of U.S. bond inflows—even amid geopolitical turmoil—confirms Treasuries’ status as a global safe haven. Second, divergent Asia-Pacific behavior (Singapore/Hong Kong buying vs. China selling) suggests varying currency and liquidity pressures across the region; notably, central bank bond sales reflect efforts to stabilize exchange rates, which may conflict with broader investment trends. Third, Korean retail investors’ sustained net selling of U.S. assets could signal systemic declines in local risk appetite or currency depreciation pressures. Fourth, the relative weakening of emerging market fund appeal versus U.S. assets implies global risk sentiment remains cautious, with investors hesitant to fully return to higher-risk allocations. Finally, improved May inflows suggest April–May TIC data may show recovery from March levels, though EM underperformance warrants ongoing monitoring. The report offers no new investment recommendations but provides traders and analysts with a real-time window into cross-border capital flows to better interpret short-term market dynamics.

Risks

• Further escalation of geopolitical tensions could amplify capital flow volatility
• Risk of larger-scale capital outflows from emerging markets
• Excessive central bank intervention in Asia-Pacific may distort market signals

What to watch

• Next TIC release on June 18, 2026, to assess April–May inflow trends
• Whether EM fund inflows continue slowing or rebound
• Future buying/selling patterns of Korean and Taiwanese retail investors
• PBOC’s balancing act between FX stability and capital outflow management