Who bears America’s recklessly ballooning $34.7 trillion national debt?

All of these securities were sold to the Treasury. So here are the owners.

Written by Wolf Richter for WOLF STREET.

The US national debt – now $34.7 trillion, up from $23.3 trillion in January 2020, and from $27.6 trillion in January 2021 – has risen so quickly that it would bring tears to our eyes, if we didn’t We know best. Over the four years and five months since January 2020, it has risen by $11.4 trillion. Since the pandemic bottomed out, the economy has been growing rapidly, yet trillions of dollars have been passing by so quickly that it’s hard to see. We don’t even want to imagine what this will look like during the next recession.

But every single one of the government-issued Treasuries was purchased, and we’ll get to their holders in a moment:

Who holds this $34.7 trillion debt?

Each of these Treasury securities is owned by an entity or individual. So here they are.

US government money: $7.1 trillion. They are held by various US government pension funds and the Social Security Trust Fund (we discussed the SS Trust Fund’s holdings, income, and exports here). These Treasury securities are not traded in the market, but are purchased directly with funds from the Treasury Department, and are redeemed at maturity at face value. They are called “internally held” and are not subject to the whims of the markets.

The remainder, currently $27.6 trillion, are securities “held by the public.”

A small portion of this $27.6 trillion in securities, such as savings bonds (including the popular I-bonds) and some other bond issues, cannot be traded.

The remainder is Treasury bills, securities and bonds, as well as Treasury Inflation Protected Securities (TIPS) and floating rate bonds (FRN). These securities are traded (“marketable”). At the end of the first quarter—this is the time frame we’ll look at below), there were $26.9 trillion of these securities outstanding.

Foreign holders: $8.0 trillion. Includes private sector holdings and official holdings, such as central banks. China, Brazil and other countries have been reducing their holdings for years. European countries, major financial centers, Canada, India and other countries have been downloaded. Overall, foreign holdings rose to an all-time high in March and fell slightly in April, which was still the second-highest level on record. While foreign holders have increased their overall dollar holdings over the years, their share of total debt outstanding has declined from 33% a decade ago, to 22.9% now because they have not kept pace with the rapid increase in U.S. debt. (We discussed the details of these foreign owners here.)

The remainder is in the hands of the United States holders.

The Securities Industry and Financial Markets Association (SIFMA) has just released its quarterly fixed income report for the first quarter. It does not show dollar amounts, but rather the percentage of Treasury bills, securities, bonds, TIPS, and FRNs outstanding. As of March, there was $26.9 trillion of these Treasuries outstanding. They were detained by:

US mutual funds: 18.0% of outstanding Treasury bonds (about $4.8 trillion). They include bond mutual funds that hold Treasury securities, and the holdings of Treasury securities in money market mutual funds.

Federal Reserve: 16.9% of outstanding Treasury bonds (about $4.6 trillion in March). Under its QT program, the Fed has already offloaded $1.31 trillion in Treasuries since its peak in June 2022 (our last update on the Fed’s QT program).

US individuals: 9.8% Of outstanding Treasury bonds (about $2.6 trillion). These are the people who keep them in their accounts in the United States.

Banks: 8.1% of outstanding Treasury bonds (about $2.2 trillion). We saw in March 2023, banks were holding a lot of long-term Treasuries and bonds that had lost a lot of their market value due to rising yields, and when depositors saw that and got scared and withdrew their money, some banks collapsed. According to FDIC data, the total amount of all types of securities held by banks — Treasuries, Social Security bonds, and other securities — reached $5.5 trillion at the end of the first quarter, with cumulative unrealized losses on all of their securities rising to 517 billion dollars. The $2.2 trillion is just Treasury securities.

State and local governments: 6.3% of outstanding Treasury bonds (about $1.7 trillion).

Pension funds: 4.3% of outstanding Treasury bonds (about $1.2 trillion).

Insurance companies: 1.9% Of outstanding Treasury bonds (about $510 billion). Warren Buffett’s insurance group, Berkshire Hathaway, has increased its holdings of Treasury bills to $153 billion.

Other: 1.5% Of outstanding Treasury bonds (about $400 billion).

This shows the extent and breadth of Treasury bonds. If these investors lose interest in current yields and demand for the current yield disappears, yields must rise until sufficient demand is achieved. This can happen suddenly, which is what we saw happen when the 10-year yield briefly broke 5% in October, unleashing a torrent of demand that sent prices higher and yields lower again. Currently, amid intense demand, the 10-year bond yield is back at 4.25%, although Treasury bill yields are closer to 5.5%.

To what extent do interest payments eat up national income, and how long can this continue? See… US Government Debt Interest Payments Rise vs. Tax Revenues and Inflation: Q1 Update

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