Who is going to buy all this US debt? (2024)

Who is going to buy all this US debt? (1)

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Rod Khleif Who is going to buy all this US debt? (2)

Rod Khleif

Master Multi-Family Real Estate, Create Multi-Generational Wealth & Freedom, Invest Passively or Actively | 1-on-1 Expert Coach | Multifamily & Apartment Investing | Real Estate Investing | #1 Best-Selling Author

Published Jan 22, 2024

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Bloomberg recently estimated that interest expense on the United States' $33T debt just crossed $1T on an annualized basis. Federal receipts are $4.4T, which means almost a quarter of all revenue is consumed by interest. Interest expense has doubled over the past two years and will probably move higher with 2024 auction activity!

"Rather go to bed without dinner than to rise in debt." - Ben Franklin

We certainly have come a long way from the frugal beginnings of the country. The chart below shows how rapidly and seemingly out of control the US debt has skyrocketed to around $100K for every person in the country.

Who is going to buy all this US debt? (3)

In 2024, 33% of our outstanding public debt matures ($7.6T) and must be reissued in a higher rate environment. On top of this $7.6T, the federal deficit could hit $2.0T in 2024, which means the Treasury would have to issue nearly $10T of new debt. The question is: where is this money going to come from and what impact will this have on interest rates and taxes?

Of the $33T of debt, roughly 78% is owned by the public (70% US vs 30% International). The major US public owners include the FED ($6T, but they are no longer buyers), mutual funds, banks, states, pension funds and insurance companies. The international buying appetite has been falling over the past 10 years (dropping from 40% to the current 30%). The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers. China has been a net seller and Japan seems tapped out. The strong dollar is also working against the Treasury. The US dollar strength versus other currencies makes it attractive for international owners to sell US debt and use the dollars to buy their own currency, boosting the value.

The remaining debt (22%) is owned by inter-government agencies including Social Security and Medicare. If you believe that Social Security and Medicare are bleeding off their surplus, then logically they will be net sellers over time as they use reserves to pay recipients.

The auctions will come down to simple supply and demand. We know the supply is increasing and the demand is falling, which is bad for pricing. If the rates on Treasuries are attractive (higher) relative to other options, then we should be able to reissue the debt. In the most recent auction, the FED had to pivot to shorter term notes to entice buyers. Today, the 6-month treasury note yields 5.25% versus 4.0% for the 10-year, so clearly interest costs will increase in the short term if the US government is forced to issue short-term debt to attract buyers. If we don't get our deficits under control, the situation will only grow worse.

There is evidence, however, that higher interest rates on US debt are attracting new buyers. Two European money managers, Rathbones and Pictet, both recently announced an increase in their holdings of US Treasuries due to the attractive rates. Currently the US 10-year (4.0%) is higher than in the UK (3.8%), Spain (3.2%), Germany (2.2%) and Switzerland (0.8%), so it seems attractive relative to these options.

We are not sure how this will all shake out, but at some point, something has to give because the trajectory we are on is unsustainable. At the end of the day, someone will have to pay for the sins of the past. Taxes need to move higher, and spending needs to be cut; both moves would hurt the economy. A weakening economy would have a ripple effect across all businesses and commercial real estate. We do not think the tax and financing benefits awarded to multi-family would be impacted during the "balance the budget phase" that is coming, due to the core nature of our product. However, the cloudy outlook reinforces our conservative thinking when evaluating deals.

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Ilan Brodsky



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great job rod!!!

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Digital Marketer | SEO Service Provider | YouTube SEO Expert | Social Media Marketing Manager | Google and Facebook Ads Service Provider | B2B Lead Generation. A Digital Marketing Specialist at Outsourcing BD Institute.


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Who is going to buy all this US debt? (2024)


Who are the largest buyers of US debt? ›

Foreign holders of United States treasury debt

Of the total held by foreign countries, Japan and Mainland China held the greatest portions, with China holding 797.7 billion U.S. dollars in U.S. securities. Other foreign holders included oil exporting countries and Caribbean banking centers.

Who is buying government debt? ›

Nearly half of all US foreign-owned debt comes from five countries.
Country/territoryUS foreign-owned debt (January 2023)
United Kingdom$668,300,000,000
6 more rows

Who owns the most debt to the US? ›

  1. Japan. Japan held $1.15 trillion in Treasury securities as of January 2024, beating out China as the largest foreign holder of U.S. debt. ...
  2. China. China gets a lot of attention for holding a big chunk of the U.S. government's debt. ...
  3. The United Kingdom. ...
  4. Luxembourg. ...
  5. Canada.

Who is the US paying debt to? ›

1 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.

How much does China owe the United States? ›

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.

Who owns over 70% of the U.S. debt? ›

Of the $33T of debt, roughly 78% is owned by the public (70% US vs 30% International). The major US public owners include the FED ($6T, but they are no longer buyers), mutual funds, banks, states, pension funds and insurance companies.

Why does the US owe so much money? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Do any countries owe the US money? ›

China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.

Why is no one buying US debt? ›

Elementary economic forces — too much supply and not enough demand — have collided to create the worst stretch for U.S. government bonds since the Civil War. The government keeps borrowing to cover its budget deficits, while once-reliable buyers of that debt, both at home and abroad, have pulled back.

Will the US ever get out of debt? ›

Economists at the Penn Wharton Budget Model estimate that financial markets cannot sustain more than twenty additional years of deficits. At that point, they argue, no amount of tax increases or spending cuts would suffice to avert a devastating default.

Who has the most debt on earth? ›

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.

Is China in more debt than the US? ›

Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.

How can the US get out of debt? ›

Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.

How much debt is Russia in? ›

In the latest reports, Russia National Government Debt reached 281.6 USD bn in Feb 2024. The country's Nominal GDP reached 494.7 USD bn in Mar 2023.

How much is the United States worth? ›

The financial position of the United States includes assets of at least $269 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP).

Who are the largest investors in the debt market? ›

Traditionally, the banks have been the largest category of investors in G-secs accounting for more than 60% of the transactions in the Wholesale Debt Market.

Who are the major domestic buyers of US Treasury debt? ›

Pension funds, mutual funds, retail portfolios, institutional portfolios, and an assortment of exchange traded funds have been important domestic buyers.

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