Who is going to buy all this US debt? (2024)

FAQs

Who is currently buying U.S. debt? ›

The international buying appetite has been falling over the past 10 years (dropping from 40% to the current 30%). The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world.

There are two basic categories of debt owners: 1) the public, which includes foreign investors and domestic investors and, 2) federal accounts, also known as "intragovernmental holdings." Each category is explained below.

The three largest holders of Treasuries -- Japan, China and the UK -- led the purchase U.S. government debt. Japanese investors raised their stash of Treasuries to $1.138 trillion in December, from $1.127 trillion in November, data showed. Their holdings were the largest since August 2022.

Every country should pay its sovereign debt. Default, we are told, is not an option. But has anyone told China? The United States pays interest on approximately $850 billion in debt held by the People's Republic of China.

The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.

Why is the US in so much debt? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Very likely the result would be a disaster. Much like when it last did this—the 1830s—a massive recession would result. “Paying off” the government debt means taking money from the private sector.

If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.

India takes the top spot. The world's most populous country owed $38.3bn to the WB at the end of 2022, down by almost $1.5bn from a year earlier. India's outstanding balance is almost double that of the next biggest debtor, Indonesia, with $20.6bn.

The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.

And Treasury plans to issue a lot of debt. And, thus, the Treasury needs buyers. At this point, the Fed is no longer a buyer of Treasuries. Pension funds, mutual funds, retail portfolios, institutional portfolios, and an assortment of exchange traded funds have been important domestic buyers.

The buyer base for US Treasuries has shifted from yield-insensitive buyers (sovereign wealth funds and central banks, including the Fed) to yield-sensitive buyers (US households, US pensions, US insurance), see chart below.

China sold a record $53.3 billion worth of Treasurys and agency bonds in the first-quarter, Bloomberg reported. It previously unloaded US debt to prop up its yuan, which has again grown weak against a rallying dollar. The country is piling into gold, which now makes up the highest share of its reserves since 2015.