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The Foreign Holders of the Ballooning US Debt: They’re Buying, But Don’t Keep Up

As China dumps Treasury securities, the Euro Area, Canada, and financial centers load up with immense appetite.

By Wolf Richter for WOLF STREET.

The question that’s on everyone’s mind is how long foreign investors will continue to support the US Treasury debt that has now ballooned to $34.75 trillion and will nail $35 trillion over the next few months. These securities are all held by someone, and a portion of them are held by foreign entities.

So far, demand for these Treasury securities from all directions has been huge, as documented by the 10-year yield that should be above 5%, given where inflation is (3.4% core CPI with lots of uncertainty surrounding it), and where short-term yields are (5.5%). But the 10-year yield is just 4.2%.

The share of foreign holdings.

Foreign investors have continued to add to their holdings of Treasury securities over the years, but the US debt has grown far faster, and so the share of the debt that is held by foreign entities has been declining for many years. In 2014-2016, foreign investors held over 33% of the debt. Their share is now down to 22.9%.

In other words, the US debt financing has become far less dependent on foreign holders – and as we’ll see in a moment, even less dependent on China and Japan.

In dollar terms, Treasury debt held by foreign entities rose to an all-time high in March, and in April dipped a tad, to $7.92 trillion, which was up by $468 billion year-over-year, or by 6.3%, according to Treasury Department data on Tuesday (red line in the chart below).

  • Top six financial centers (London, Belgium, Luxembourg, Switzerland, Cayman Islands, Ireland): $2.3 trillion (blue), +9.2% year-over-year, despite a dip in April from the all-time high in March.
  • Japan, #1 US creditor: $1.15 trillion (green), +2.2% from a year ago. Over the past 12 years, Japan’s holdings have remained in the same range between $1.0 trillion and $1.3 trillion, hitting the low end of the range in 2011 and 2018.
  • China and Hong Kong combined: -9.1% year-over-year, to $992 billion (purple), up a tad in April from the lowest in many years.

China + Hong Kong v. the Euro Area.

China and Hong Kong whittled down their combined holdings from over $1.4 trillion in 2012-2017 to $992 billion now (blue). During the capital-flight panic in 2016, China’s holdings of Treasury securities fell sharply as it tried to prop up the RMB. It increased its holdings again, but never all the way back to the prior level, and holdings have declined from then on.

The countries of the Euro Area piled into US Treasury securities at a furious rate, expanding their holdings from $500 billion in 2011 to $1.58 trillion now (red), and increase of over $1 trillion. Year-over-year, the Euro Area’s holdings surged by $202 billion, or by 14.6%!

The six largest financial centers – the UK (the City of London), Belgium, Luxembourg, Switzerland, Cayman Islands, and Ireland: +9.2% year-over-year to $2.31 trillion, the second-highest level ever, just behind March, having more than tripled since 2011!

These countries specialize in handling the financial holdings of global companies, individuals, and governments. Ireland is a favorite for US companies to store their profits. So some of their holdings are actually held for US entities.

  • UK: $710 billion
  • Luxembourg: $384 billion
  • Cayman Islands: $319 billion
  • Ireland: $308 billion
  • Belgium (home of Euroclear): $312 billion
  • Switzerland: $272 billion.

Japan’s holdings: +2.2% year-over-year, to $1.15 trillion, with a drop in April. They zigzagged higher, starting in late 2022, after dropping sharply.

Other top foreign holders of Treasury securities:

Canada’s holdings: $338 billion, +36.9% year-over-year, despite the drop in April! Holdings have multiplied by 7 over the past 12 years! Canadians love US Treasury securities so much?

Taiwan’s holdings:  $257 billion, +5.3% year-over-year, a tad below the record high in March:

India’s holdings:  $234 billion, -2.2% year-over-year. India has multiplied by six its holdings since 2011:

Brazil’s holdings:  $224 billion, -2.7% year-over-year. In 2023 and 2024, the trend has been higher, after having spiraled down by about one-third since the peak in 2018.

France’s holdings are part of the Euro Area chart above, but it’s one of the biggest players in the Euro Area, along with the financial centers in the Euro Area, and far bigger than Germany. And its holdings have shot higher and in April reached a new all-time high of $277 billion (compared to Germany which holds just $87 billion):

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