With recent concerns about budget deficits and a rating agency downgrade, it’s natural to hear concerns about foreign governments owning and selling U.S. Treasury bonds and wonder whether that could disrupt the financial system. Let’s step back and review the facts.
All bonds have two risks: Interest rate risk and credit risk. U.S. Treasury bonds are widely regarded as one of the safest assets globally, backed by the full faith and credit of the United States government. While foreign governments do own some Treasury debt, the vast majority is held domestically — by U.S. institutions, the Federal Reserve, pensions, mutual funds, insurance companies, and private investors. Here’s a simple breakdown:
Holder | Amount (Approx.) | % of Total |
U.S. Public & Institutions | $17 trillion | 66% |
Federal Reserve | $5 trillion | 20% |
— Japan | $1.1 trillion | 4% |
— China | $775 billion | 3% |
— United Kingdon | $740 billion | 3% |
— Canada | $375 billion | 1% |
— Luxembourg | $370 billion | 1% |
— Ireland | $330 billion | 1% |
Source* https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html
Total ownership by foreign countries is less than 15% of the whole market, and the U.S. Treasury market is incredibly deep and liquid. Over $1 trillion of bonds trade every day. This scale allows the market to absorb large transactions, even if a foreign holder were to sell a significant position. Historically, these sales have had limited and temporary effects on prices.
In times of uncertainty, it’s natural to have questions. Fortunately, the strength of the U.S. Treasury market — supported by broad ownership, daily trading volume exceeding $1 trillion, and the full backing of the U.S. government — provides a strong foundation that has weathered countless global events. We remain confident in the stability of this market and will continue to monitor your portfolio with care, navigating toward your long-term goals.
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Past performance is no guarantee of future results. Please contact your financial professional for more information specific to your situation.