Who Owns American Treasury Bonds?

by P.J. DiNuzzo                                                                                                January 2, 2020

Who Owns American Treasury Bonds?

You often hear that the Chinese government might somehow strike back at the U.S. by selling off its Treasury bond holdings. But did you know that China is not actually the biggest foreign holder of the government securities?

This past June, Japan overtook China as the largest non-U.S. holder of Treasuries, with $1.17 trillion—above China’s $1.10 trillion in holdings. That’s 17% and 16% of the total, respectively. It’s unlikely that either country will decide to dump their American bond holdings, since the comparable alternatives around the world—now some $13 trillion in global government debt—are paying negative interest rates.

Japan’s and China’s total of $2.27 trillion ownership in U.S. bonds is, in any case, a small fraction of the $23 trillion U.S. debt. So who would be the biggest threat if it sold out America’s bonds? The Social Security Trust Fund is actually the largest single holder of Treasuries, with around $2.887 trillion. As we approach the year 2026, when inflows are scheduled to fall below outflows, the trust fund will be steadily liquidating Treasuries, but initially at a fairly slow pace.

The other holders of American debt? The U.S. Federal Reserve, after its QE policies, now owns $2.46 trillion in Treasury bonds. American pensions are holding $2.8 trillion, mutual funds another $2.1 trillion, individual investors own $1.8 trillion, and banks and state/local government funds together have invested around $1.4 trillion in U.S. government bonds. Other significant investors include the United Kingdom (5% of total debt, or $323 billion)), Brazil (4.4%; $306 billion), Ireland (4%; $271 billion) and Luxembourg (3.7%; $230 billion).

Sincerely, 

P.J. DiNuzzo, CPA, PFS™, AIF®, MBA, MSTx
President, Founder, and Chief Investment Officer