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According to the latest data from the U.S. Treasury Currency Clock, as of January 1 this year, the total U.S. national debt exceeded $35 trillion, accounting for more than 140% of the U.S. gross domestic product. This figure has once again sparked market concerns and speculation about the future direction of the economy. In recent years, the size of the US debt has been expanding at an alarming rate, adding an average of $1 trillion every three months. On a per capita basis, this equates to more than $100,000 in debt per U.S. citizen.
However, contrary to what many people think, the number of U.S. bonds held by overseas investors is not overwhelming. According to the U.S. Treasury Department, the share of foreign investors holding U.S. bonds has fallen from 34% in the past to about 24%. In fact, the largest holders of U.S. Treasury bonds come from China, and the proportion of U.S. Treasury bonds held by the Federal Reserve and the federal government has remained at about 40%.
Due to the continuous expansion of the size of the US debt, many people are concerned about who will be the creditor of the US Treasury bond next. In fact, U.S. households and individuals have recently become major buyers of U.S. Treasuries. According to data released by Goldman Sachs, since the beginning of this year, American households have issued more than 70% of new U.S. bonds, becoming the largest buyers of U.S. bonds. This phenomenon can be explained by the fact that the United States is currently in a stage of medium to high interest rates, and the coupon rate of newly issued U.S. bonds is high, making U.S. bonds regarded as "risk-free" assets with high attractiveness.
In addition, hedging** in the United States also plays an important role. These hedges** make profits by making a large number of U.S. Treasury basis trades, taking advantage of the spread between the spot and ** markets of U.S. Treasuries. In order to maximize returns, hedging** often employs highly leveraged trading, which is traded by magnifying funds dozens of times. With leveraged trading, billions of dollars worth of U.S. Treasury transactions can be operated with only a small amount of capital.
The U.S. Treasury divides holders of U.S. Treasury bonds into two categories: public holders and ** holders. Public holders include individuals, businesses, local** and other entities, representing 79 percent of the total U.S. Treasury debt13%。Holders include federal trusts, commons, and special funds, accounting for 20 percent of the total U.S. Treasury debt87%。
In recent years, foreign investors' holdings of U.S. bonds have been declining. Taking 2021 data as an example, Japan and China hold $769.6 billion and $1,098.2 billion in U.S. bonds, respectively, accounting for 223% and 314%, which is no longer the top two overseas holders of U.S. bonds. The largest holders of U.S. bonds are institutions and individuals in the United States. Notably, China sold off U.S. bonds for the seventh consecutive month, falling to $769.6 billion, the 19th consecutive month of holding below $1 trillion.
As the top bank in the United States, the Federal Reserve's actions on U.S. bonds have attracted much attention. In June 2022, the Federal Reserve announced ** assets, which included reducing its holdings of U.S. Treasuries. As of the end of October 2023, the total size of the Fed's balance sheet was reduced to 7$867 trillion, a decrease of $1 trillion. Although the Fed's primary target is the U.S. Treasury Bonds, it is still relatively small compared to the U.S. Treasury market as a whole.
Due to the Fed and overseas creditors, domestic demand has become the key to the receiver. The purchasing power of U.S. households has always been an important guarantee of the stability of the U.S. bond market. Data shows that in recent years, American households have bought more than 70% of new U.S. bonds, becoming the largest buyers of U.S. bonds. In contrast, U.S. individual investors are limited in the amount they can purchase U.S. Treasuries through the U.S. Treasury TreasuryDirect**, with only $10,000 per person per year in savings bonds.
In addition, hedging also plays an important role. Hedging** makes a profit by making a large number of U.S. Treasury basis trades, taking advantage of the spread between the spot and ** markets. In order to maximize returns, hedging** is often traded with high leverage, using several times the leverage. The existence of these hedges** will further support the stability of the U.S. Treasury market.
In the search for the next "taker", the United States has also set its sights on the nonprofit sector. These non-profit sectors have large pools of money that can achieve long-term stable returns by purchasing U.S. Treasury bonds. However, the size of their participation in the U.S. bond market is not yet clear, but they are expected to be an important force in the receivers.
The sharp expansion of the US Treasury has raised global concerns about debt risk. The Federal Reserve's debt reduction measures and overseas creditor countries have intensified the focus on the receivers of US bonds. Under the influence of internal and external creditors, US households, hedges** and the nonprofit sector have become important receivers in the current US bond market. Although the purchasing power of U.S. households is limited, it accounts for a relatively high proportion of new U.S. bonds, which has played a positive role in the stability of the bond market. Hedging** also provides liquidity to the market by trading a large number of transactions and amplifying the amount of capital with high leverage. In addition, the United States** is also looking for other potential takeovers, such as the nonprofit sector. However, in the face of the huge scale of U.S. bonds, there is still some uncertainty about the future receivers, and more in-depth observation and research are needed.
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