Rosenbaum Analysis: Why Foreign Investors Are Flooding the U.S. Corporate Bond Market

JPMorgan Chase strategists led by analyst Nathaniel Rosenbaum presented data indicating an unprecedented surge in foreign investors’ interest in U.S. corporate debt. According to JPMorgan’s research, published through Jin10, January of this year marked a turning point in global capital flows.

Record Volumes: The Numbers Speak for Themselves

Foreign investors are purchasing U.S. corporate bonds at the highest pace in the past three years. Overall, in January, the average daily net inflow amounted to an impressive $332 million — the highest since February 2023.

However, the final week of January showed some slowdown: daily inflows dropped to $240 million, a 59% decrease compared to the previous seven days. Despite this pullback, Rosenbaum and his colleague Sylvie Mantri note that in the long term, the trend remains upward, reflecting sustained foreign appetite for American assets.

What Attracts Foreign Investors?

The appeal of U.S. corporate bonds is supported by several factors. First, stable yield levels continue to offer competitive returns on a global scale. Second, reduced costs of currency hedging have made U.S. assets more economically attractive for risk protection. These elements together have boosted demand for American corporate debt among foreign portfolio managers.

Is Dollar Weakness a Threat? How Big Is the Risk?

Wall Street is closely monitoring whether further dollar depreciation could reverse the current capital flow. Theoretically, a weakening currency might motivate foreign investors to withdraw funds en masse from U.S. assets, fearing losses on currency transactions. However, current JPMorgan data under Rosenbaum’s control indicate that capital flows remain stable. This suggests that foreign investors have not yet felt enough impetus to revise their positions, despite the actual weakening of the U.S. dollar.

Rosenbaum and his team’s analysis suggests that a shift in foreign capital behavior will only occur if global macroeconomic conditions change significantly or if the yields on alternative assets greatly surpass the attractiveness of U.S. corporate bonds.