Sunday, September 29, 2013

Who Owns the United States Federal Debt?

With the critical phase of the debt ceiling negotiations about to take place, I wanted to take a look at  who currently holds America's federal debt, particularly foreign owners, and how their ownership levels have changed with time.  

From the Treasury website, here is a chart showing which nations are major foreign holders of Treasury securities by month:

In total, foreign nations own $5.590 trillion worth of Treasury Bills, T-Bonds and Notes with the majority being held in longer term T-Bonds and Notes.  According to the Monthly Statement of the Public Debt for the end of July 2013, there was total outstanding marketable debt of $11.464 trillion as shown here:

This means that 48.7 percent of all marketable U.S. federal government debt is foreign-owned.  China and Japan are the number one and two holders with China holding $1.277 trillion worth of Treasuries and Japan holding $1.135 trillion worth of Treasuries.  If you add in the Treasury Bills, Bonds and Notes held by the Federal Reserve, a total of $2.048 trillion in mid-September 2013, 38.9 percent of America's federal government debt is held by three parties.

By way of comparison, the world's second largest nominal sovereign debtor nation is Japan.  Here is a pie chart showing who holds Japan's $9.68 trillion worth of government bonds:

Notice that only 9.1 percent of Japan's outstanding bonds were owned by foreigners at the end of the third quarter of 2012.  Obviously, this makes the highly indebted Japanese government less prone to pressures exerted by external forces.  For another comparison, here is a chart showing the percentage of gilts (United Kingdom sovereign bonds) held by overseas owners from 2000 to the present:

Currently, only 31. 2 percent of gilts are held by overseas investors, a far cry from the U.S. rate of 48.7 percent, and a rate that has been very stable for the better part of a decade.

Let's close by looking back in time at the holdings of the number one owner of U.S. Treasuries (after the Federal Reserve, of course).  For the purposes of this graphic, I am using China's holdings on December 31 of the years between 2000 and 2012 and the holdings for July 2013:

Notice that since 2010, China's holdings of Treasuries have remained more or less static when compared to the growth levels between 2000 and 2010?  During that time, the total value of marketable Treasury debt grew from $8.841 trillion to its current level of $11.464 trillion, an increase of 29.7 percent at the same time as China's holdings of America's debt remained more or less static.

One has to wonder whether the foreign holders of America's debt, particularly China and Japan, will eventually reach a final point of frustration because of the ongoing political intransigence over debt negotiations and the seemingly endless rise in the debt level itself.  With China now controlling 11.1 percent of all outstanding Treasury securities, they could easily put a great deal of pressure on the current or future Administrations on various key economic and diplomatic issues.


  1. I'm no expert by any means but would it be possible that if China and Japan have their fill that other Nations maybe India and Brazil pick up the slack and buy what China and Japan will not?

  2. China buys to keep rates low so Americans can borrow to buy there goods. Japan buys to offset its own printing of the yen in an attempt to make Japanese products cheap reletive to China. My point is, they buy because they want and need to.