Jeff Harding

Who Owns Our Sovereign Debt?

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The TIC (Treasury International Capital) transaction report came out today. It is something I follow mildly, because I don’t think holders of U.S. dollars have much of a choice other than to buy U.S. debt or U.S. goods with their dollars. But here is the report:

Net buying of long-term equities, notes and bonds totaled $24 billion during the month, compared with net buying of $27.2 billion in February, according to statistics issued today in Washington. Including short-term securities such as stock swaps, foreigners purchased a net $116 billion, compared with net buying of $95.6 billion the previous month…

China remained the biggest foreign holder of U.S. Treasuries, after its holdings fell by $9.2 billion to $1.145 trillion in March from $1.154 trillion in February, according to the Treasury’s statistics.

Japan, the second-largest holder, increased its holdings by $17.6 billion to $907.9 billion in March from $890.3 billion in February. Hong Kong, counted separately from China, reduced its holdings by $2.5 billion to $122.1 billion in March from $124.6 billion in February.

The real significance of having 47% of buyers from foreign countries buying U.S. debt is that they may require better returns which makes it more difficult to sell U.S. debt. In the very least coverage ratios will decline. But, assume the Chinese buy, say Italian debt instead: what will the Italians do with U.S. dollars? It’s not a game of musical chairs where someone ends up with dollars when the music stops. Capital doesn’t sit still.

One reason for publishing this report is to republish this great chart produced by Veronique de Rugy of George Mason’s Mercatus Center:

Graphic depicting owners of U.S.'s public debt

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Published by kind permission of Jeff Harding.
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