According to a report from the Institute of International Finance (IIF), foreign investors are beginning to diversify their portfolios away from US Treasuries due to increasing debt levels in the United States. While net purchases of US government debt have remained stable this year, there has been a noticeable uptick in foreign accumulation of Japanese and European sovereign bonds. The IIF report highlights that the US debt-to-GDP ratio is expected to continue rising, contrasting with more moderate debt trajectories in Europe and Japan. Despite these challenges, domestic demand has helped the Treasury market avoid liquidity stress. Interestingly, foreign demand for US corporate bonds remains robust, even in the wake of rising oil prices following the US's military actions in Iran. The analysts noted that tensions in the Middle East have had limited effects beyond energy markets, with a quick recovery in global risk appetite. However, prolonged conflicts could lead to increased global debt levels, as governments may need to borrow more due to rising energy and food prices, potentially driving up borrowing costs.