BRICS Shift Away from US Treasuries Signals Growing De‑Dollarisation

Introduction

The ING Bank, a Dutch banking‑insurance giant, released a striking report showing that BRICS nations are quietly reducing their exposure to U.S. Treasury securities. In October alone, the bloc sold $29 billion of U.S. debt, with India overtaking China as the biggest seller.

Key Findings from the ING Report

• October 2024 sales: $29 billion of U.S. Treasury sold by BRICS members.
• India vs. China: India sold $12 billion, China $11.8 billion – India now leads the dump.
• Other BRICS: Brazil sold $5 billion; the combined BRICS outflow was $28.8 billion.
• Net foreign inflow: Only $17.5 billion of long‑term U.S. securities were bought in October, the smallest positive net flow since April.

How U.S. Treasury Works

• The U.S. government finances its annual deficit (≈ $1.8 trillion) by issuing Treasury bills (≤ 1 yr), notes (2‑10 yr) and bonds (20‑30 yr).
• Investors receive periodic interest and the principal at maturity.
• Total U.S. public debt has risen above $38 trillion (≈ 130 % of GDP) and the government pays about $1.2 trillion a year in interest – roughly 17 % of the federal budget.

Declining BRICS Holdings

The drop is the steepest for China in the last 15 years; its holdings have halved since 2013 (from $1.3 trillion to ≈ $688 billion).

Why Are BRICS Dumping U.S. Treasuries?

1. De‑dollarisation & Reserve Diversification – Countries want to reduce reliance on dollar‑denominated assets that could be frozen or weaponised.
2. Geopolitical Risk – Fear that the U.S. could restrict access to its financial system or impose sanctions.
3. Domestic Policy Needs – India’s RBI uses Treasury sales to obtain dollars for market interventions, smoothing rupee volatility and protecting export competitiveness.
4. Rising U.S. Debt Burden – With debt climbing past $38 trillion and interest costs soaring, confidence in the safety of Treasuries is eroding.

Impact on the United States

• Funding Gap: Historically, central banks (including India and China) bought Treasuries, providing a steady demand. Their retreat means the U.S. must rely more on domestic investors and private foreign funds.
• Higher Borrowing Costs: Reduced foreign demand could push yields up, increasing the cost of servicing the debt.
• Dollar Dominance Erodes: Global reserves in dollar‑denominated assets have fallen from ~72 % in 2000 to about 56 % today, a trend accelerated by BRICS sales.
• Potential Market Volatility: If many holders sold simultaneously, Treasury prices could drop sharply, but the sales have been gradual, limiting immediate shock.

Long‑Term Outlook

• Continued Decline in Dollar Share: If the trend persists, the dollar’s share of global reserves may dip below 50 % over the next two decades, paving the way for a multi‑currency reserve system.
• U.S. Fiscal Pressure: Higher interest payments will consume a larger slice of the federal budget, potentially crowding out other spending.
• Strategic Shifts: Countries may increase holdings of gold, euros, yen, or a new BRICS‑led reserve currency.
• Risk of Capital Flight: In a worst‑case scenario, a sudden loss of confidence could trigger rapid capital outflows, forcing the U.S. to raise rates sharply.

Conclusion

The ING Bank report reveals a quiet but significant re‑allocation of reserve assets by BRICS nations, especially India’s overtaking of China in selling U.S. Treasuries. This reflects broader de‑dollarisation, geopolitical caution, and domestic monetary strategies. While the immediate impact on Treasury markets is muted due to the gradual nature of the sales, the long‑term implications could be higher borrowing costs for the United States and a slower decline of the dollar’s reserve‑currency dominance.

BRICS countries are steadily pulling back from U.S. Treasury holdings—India now leads the sell‑off—signaling a broader move toward de‑dollarisation that could raise U.S. borrowing costs and gradually weaken the dollar’s role as the world’s primary reserve currency.