In this week’s edition of “Three on Thursday,” we take a deeper look into the complexities surrounding U.S. federal debt ownership. As of the end of October, total U.S. federal debt outstanding reached a staggering $33.7 trillion, marking a notable calendar year-to-date growth of 7.3%. While news headlines fervently highlight this substantial expansion, an interesting question remains: who holds all this debt? Many believe it’s foreign countries, but is that the case? And what is intragovernmental debt? To provide a more comprehensive understanding, we have included three informative charts below.
The primary holder of U.S. Federal debt is, surprising to many, the U.S. federal government itself, accounting for approximately 40% of the total outstanding debt. Following closely are various other domestic entities, collectively constituting slightly over 35% of the overall debt holdings. These entities encompass mutual funds, depository institutions, state and local governments, pension funds, insurance companies, among others. Lastly, foreign holders of U.S. debt make up just over 24% of the total, comprising the diverse range of entities engaged in holding U.S. debt.
As of August 2023, foreign holdings of U.S. debt, encompassing both governments and private investors, have reached $7.7 trillion, nearing record highs. This comes at a time when the two largest foreign holders of US treasuries, Japan and China, have been net sellers leading many to infer the U.S. is facing a shortage of debt buyers. Yet, over the past year overall foreign holdings of US debt have climbed by $214.3 billion even though China and Japan’s holdings shrunk by $213 billion, meaning excluding these two countries foreign holdings of US treasuries grew by an even stronger $427.3 billion.