Who bought the incredible increase in US public debt, which now stands at $30.4 trillion in Treasury securities?

A burning question in our uncertain times.

By Wolf Richter for WOLF STREET:

The gross national debt of the United States has now reached $30.4 trillion, having climbed $7.0 trillion since March 2020. Each of these Treasury securities had to be purchased and is held by an institutional investor, a bank, government entity or individual in the United States or globally.

The burning question is: who the hell bought and owns all these Treasury securities?

Treasuries have become more attractive this year as yields have risen across the board, but unfortunately remain below the rate of CPI inflation. Yields rose because investors demanded higher yields to buy them. If there is not enough demand for Treasuries, yields rise until there is enough demand. If yields increase enough, I’m long. Yield solves all demand problems.

The Fed, the biggest buyer until the start of this year, is no longer increasing its holdings. And in June, he will begin to reduce his holdings, even as the government issues more debt and someone will have to buy it all.

So who owns this Treasury debt in our increasingly uncertain times?

Foreign creditors of the US government.

Foreign holders of treasury bills: $7.61 trillion at the end of the first quarter, according to Treasury Department International Capital (TIC) data, down $134 billion from the previous quarter, but up $575 billion dollars compared to a year ago.

About $4.07 trillion of that is held by foreign central banks and government entities; the rest by foreign institutional investors, corporations, banks and individuals.

Over the years, the gross national debt of the United States has exceeded the growing holdings of foreign entities, and at the end of the first quarter by 25.1%, exceeding the previous multi-year low and down from the range of 34 % from 2012 to 2015 (dollar = blue line, left scale; % of total US debt = red line, right scale):

Japan: $1.23 trillion end of March, after falling $74 billion in the month. Japan remains the largest foreign creditor of the United States, and with that dip in March, it is now about the same level as a year ago.

China: $1.04 trillion, reduce its assets:

Japan and China were far less important as US creditors as gross national debt continued to exceed their relatively stable holdings. In March, Japan’s share (purple) fell to 4.1% and China’s share (red) to 3.4%:

Other major foreign holders.

Most of the top 10 foreign holders after Japan and China are tax havens and financial centers, some of them are just small countries that cater to global corporations and the elite, including the US corporations, which can shelter their capital there in offshore mailbox entities where some of them their treasury holdings are registered.

The third largest foreign holder, after Japan and China, is the United Kingdom with $635 billion in Treasuries. It is the financial center of London, the “London Laundromat”, and anyone, anywhere could be the true holder of these securities. France and Canada have recently entered the scene with massive increases.

The top 10 foreign holders behind Japan and China:

  • UK: $635 billion (+43% YoY)
  • Ireland: $316 billion (+2% year-on-year)
  • Luxembourg: 301 billion dollars (+6%)
  • Cayman Islands: $293 billion (+36%)
  • Switzerland: 274 billion dollars (+8%)
  • Belgium (Euroclear headquarters): 265 billion dollars (+12%)
  • France: 247 billion dollars (+117%)
  • Taiwan: 251 billion dollars (+3%).
  • Brazil: $237 billion (-7%)
  • Canada: $222 billion (+109%)

Domestic creditors of the US government.

U.S. government “internal” assets: $6.52 trillion, a record high, up $48 billion from the previous quarter and $411 billion year-on-year, according to Treasury Department data.

These funds are held by U.S. government pension funds for military personnel and federal civilian employees, the U.S. Social Security Trust Fund, and other federal government funds that invest their balances exclusively in Treasury securities. . In other words, the government owes these funds to the current and future recipients of these funds – not “to itself”.

Their share of America’s incredible soaring national debt continued to fall, reaching a new multidecade low of 21.5% in March, down from a 45% share in 2008 (dollars = blue line, scale left; % of total US debt = red line, right scale):

Federal Reserve: $5.76 trillion at the end of March, up $818 billion year-over-year, and $2.42 trillion from March 2020, when it launched its printing spree. most reckless money ever.

The share of the Fed’s holdings of Treasuries in total debt began to decline last year and by the end of March fell to 19.8% of the burgeoning US national debt. These are only Treasury securities on the Fed’s books and do not include the large amount of MBS and other securities the Fed holds:

US banks: $1.7 trillion, according to data from the Federal Reserve Board of Governors on bank balance sheets. This is an increase of $40 billion from the previous quarter and $410 billion year-over-year. Banks, stuffed to the gills with cash, are gorging themselves on Treasuries now that they are paying a noticeable return. They now own 5.6% of the skyrocketing US national debt:

Other US institutional and retail investors: $8.8 trillionup $722 billion from the prior quarter and $2.4 trillion from March 2020. These include bond mutual funds and money market funds, US pension funds, individual investors, like me, US insurance companies, state and local governments, and other US entities.

And here they are, the major holders of America’s incredible rising national debt, stacked on top of each other:

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John A. Bogar