Tracking the Ownership of US Debt

As of Dec. 2012, we are no longer updating this data monthly. The links provided give the reader access to the base data. In the year we have been tracking it, US debt has shown a steady increase without exceptional events. We have seen no change in the Chinese component that is cause for comment or alarm.

The size of the US Federal Debt is mammoth and as such has the potential for influencing global markets, economies and currencies in major ways. In order to analyze claims made by others about the nature of the debt, the periodic changes to it, and future scenarios involving the debt, we need to have access to factual data and information. This post will provide that while giving a current snapshot of and commentary on it and the changes to it.

The Fed’s securities holdings for its own account which are balance sheet items, are reviewed in detail below but tracked separately in a snapshot in Tracking the Fed Balance Sheet. The Fed’s custodial holdings of US Debt for foreign accounts are shown in the following snapshot view and reviewed in detail later in this post. The snapshot is a visual indication of the week-over-week (wow) and year-over-year (yoy) changes in dollar value shown in Table 1A of the H.4.1

For reporting on total foreign holdings of US debt we use the Treasury Department table MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES to calculate the month-over-month (mom) and year-over-year (yoy) changes in dollar value for the  snapshot below. For the total of all US debt, we use the FRED data series Federal Government Debt: Total Public Debt (GFDEBTN) which is taken from the United States Central Summary General Ledger Account Balances. It should be noted that this data is reported quarterly and lags by about two quarters.

Securities Held in Custody for Foreign Official and International Accounts Jan 28, 2015 (Millions) WOW
Change
YOY
Change
Marketable U.S. Treasury Securities (WMTSECL1)  – 12,211  – 40,736
Federal Agency Debt and Mortgage-backed Securities (WFASEC1) – 2,094  – 21,097
Treasury Department Nov 2014 (Billions) MOM
Change
YOY
Change
Foreign Holders of treasury Securities  + 40.4  + 584.35
Total US Debt Q2, 2015 (Millions)
18,151,998

Comment

Debt in foreign hands continues to grow. The surprise is that China, with $1271.2 billion in June,, the latest reporting month, is holding more debt than any time in the last year. Russia’s holdings on the other hand have decreased 42% in the same timeframe.

Update: 20140516

In the above comment we discussed the purchases of US Debt by Belgium. Like others (Putin Moves $50 Billion Of Treasuries Right Under Obama’s Noise— Grins Ear-To-Ear! ), we decided to look at the balance sheet of the National Bank of Belgium (NBB) (Statistical bulletin – Monthly update  (2014-04) ). Table 13.2 shows an increase  in assets from October 2013 to April 2014 of only 758 million € euros. When the Fed buys assets, the acquisition is offset by an equivalent amount of base money creation. Looking at the NBB base money supply in Analytical accounts of the Central Bank  (2014-04), it has increased by only 179 million € in the last year. The NBB is not responsible for the purchase of the US securities shown by the Treasury Department.

We went looking in the NBB data for any accounts where large sums of money may have left a trace. In the table Financial assets held by non-financial corporations we found the column Unquoted shares and other equity to show an increase of 53.9 billion € for Q4 2013. In the same period, the US table Foreign Holders of treasury Securities showed an increase for Belgium of $84.3 billion. At a EUR/USD rate of 1.36 the euro converts to $73.3 billion. This is our best guess at where the treasuries are squirreled away.

If the Fed bought them two things would have happened. There would be $83 B of securities showing up on the asset side of their balance sheet. This could be part of the current QE process and we would not know it barring a detailed analysis of the CUSIP numbers of recent acquisitions. Hard work. At the same time an $83 B liability would have to appear. This too could be buried in the excess reserve accounts of primary dealers and we would not be able to trace it. However, the $83 B would not then show up in the accounting records of the BNN. It does not mean that some Treasuries are showing up on the Fed’s balance sheet from foreign sales. It does mean that the quantities are not large and cannot explain the Belgian owner(s) of the $83 B reputed to be in the private in Belgium.

As we have pointed out in the past, if any party wants to “dump” Treasuries, there has to be a buyer. The interesting question is why the buying is concentrated in Belgium. A number of questions come to mind. There is increasing speculation that the ECB will have to engage in massive QE this year. The quality of the paper they buy may be constrained by Bundesbank mandate. This excludes the bonds of most of Europe. One or more banks with insider information could be positioning to sell quantities of US Treasuries to the ECB.

If the Russians are selling in desperation, they may be forced to liquidate their position at a loss to the buyer. On the other hand, Treasury yields have been dropping in the US recently meaning prices are rising. What better time to sell than into a rising market and possibly for a nice profit. The 20.4% reduction in Russian holdings was done in March. Today is the middle of May. At the March rate of sale, they could be down to under $50 B. And by the time we become aware of that, they could easily hold no Treasuries. And where would Russia place the money raised? Gold would be a safe bet and pipelines to China would be a smart bet.


What Debt the Fed Holds On Its Balance Sheet

The total value of securities held outright is shown by this graph from FRED, Reserve Bank Credit – Securities Held Outright (WSECOUT):

FEDERAL RESERVE statistical release H.4.1, Table 8, which we review in some detail in The Fed’s Balance Sheet, has the following three line item breakdown for the securities.

U.S. Treasury Securities

This is the current face value of the Federal Reserve’s outright holdings of nominal Treasury bills, notes and bonds. Their total value is shown by this graph from FRED, Assets – Securities Held Outright – U.S. Treasury Securities – Notes and Bonds, Nominal (WSHOSNB):

Federal Agency (GSE) Debt Securities

This is the current face value of federal agency obligations held by Federal Reserve Banks. These securities are direct obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The total value is shown by this graph from FRED, Assets – Securities Held Outright – Federal Agency Debt Securities (WSHOFDSL):

Mortgage-Backed Securities (MBS)

This is the current face value of mortgage-backed obligations held by Federal Reserve Banks. These securities are guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. The total value is shown by this graph from FRED, Assets – Securities Held Outright – Mortgage-Backed Securities (WSHOMCB):

Comment

The bulk of the debt  on the Fed’s balance sheet was acquired through the special programs and market operations designed to defuse the financial crisis that began in 2007. Prior to this crisis, the Fed did not accept GSE or MBS debt as collateral in market operations which explains why the latter two graphs have a zero component well into 2008.

As the graphs show, the latter forms of debt are maturing and mostly not being replaced. Instead, the Fed is shifting its balance sheet back towards a pure Treasury portfolio.

What the Fed Holds for Foreign Accounts

Federal Reserve Bank New York, on behalf of the Federal Reserve System, provides correspondent and custodial banking services for central banks, monetary authorities, and certain international organizations to facilitate their official financial operations. The total value of securities held for these accounts is shown by this graph from FRED, Memorandum item: Marketable Securities Held in Custody for Foreign Official and International Accounts (WSEFINT):

FEDERAL RESERVE statistical release H.4.1, Table 1A, also mentioned in The Fed’s Balance Sheet, has the following two line item breakdown for the securities.

 U.S. Treasury Securities

The total value of Treasury securities held for foreign accounts is shown by this graph from FRED, Memorandum item: Marketable Securities Held in Custody for Foreign Official and International Accounts – U.S. Treasury Securities (WMTSEC):

Federal Agency Securities

The total value of Federal agency (GSE) securities held for foreign accounts is shown by this graph from FRED, Memorandum item: Marketable Securities Held in Custody for Foreign Official and International Accounts – Federal Agency Securities (WFASEC):

Comment

Total holdings of securities for foreign accounts has been in a sideways trend since late Q2, 2011. There is no observable trend of foreign account holders reducing total holdings. Holdings of GSE debt, 21% of the total debt held for foreign accounts is in a slight downtrend but not enough to influence the total.

Interestingly, the overall decline in foreign-held GSE debt parallels the decline in GSE and MBS debt on the Fed’s balance sheet, reinforcing the idea that there is a rotation out of this kind of debt into pure sovereign debt.

Foreign and US Purchases of Debt According to the Treasury

The Treasury Department has a program called Treasury International Capital System (TIC). They collect and compile data on the foreign component of securities, banking, and derivatives. Where appropriate, they include US assets held by foreign residents and foreign assets held by US residents.  The securities data is reported monthly. A comparison of foreign holdings as estimated by TIC and those recorded by the Fed shows TIC data is about 25% greater than Fed figures for comparable items.

Purchases and Sales of All Security Types Between Foreign and US Residents

Table snetUS, Foreign Net Purchases of U.S. Long-Term Securities, shows the total net purchases by foreigners by country of US securities by asset type for the the most current 3 months. In this case Net Transaction = Gross Purchases – Gross Sales.

Table snetFor, Net Transactions in Foreign Long-Term Securities by US Residents, shows the total US net purchases by country of foreign securities by asset type for the the most current 3 months. Negative entries indicate a net U.S. purchase of foreign securities, or an outflow of capital from the United States while positive entries indicate U.S. net sales of foreign securities and an inflow of capital into the United States. In this case Net Transaction = Gross Sales – Gross Purchases.

Long-term US Asset-Backed Securities (ABS)

TOTAL FOREIGN PURCHASES AND SALES OF LONG-TERM U.S. ASSET-BACKED SECURITIES is a table that shows the monthly gross foreign purchases and sales and the net of the two, of US agency and corporate asset-backed securities (ABS). In this case Net Transaction = Gross Purchases – Gross Sales.

TOTAL PURCHASES AND SALES OF LONG-TERM FOREIGN ASSET-BACKED SECURITIES BY U.S. RESIDENTS gives similar information about the purchase of foreign ABS by US residents. In this case Net Transaction = Gross Sales – Gross Purchases.

Aggregate

The Treasury site page U.S. Transactions with Foreigners in Long-Term Securities is a country selector. Selecting any country opens a table called FOREIGN PURCHASES AND SALES OF LONG-TERM DOMESTIC AND FOREIGN SECURITIES BY TYPE for that country. The table shows the aggregate gross purchases and aggregate sales between foreign and US residents by asset type by month.

A second table performs the same aggregation across all countries for grand totals. Its gross figures when netted give the grand totals shown in Table snetFor above.

Finally, a table, NET PURCHASES OF U.S. TREASURY BONDS & NOTES BY MAJOR FOREIGN SECTOR: FOREIGN OFFICIAL INSTITUTIONS, OTHER FOREIGNERS, AND INTERNATIONAL & REGIONAL ORGANIZATIONS, gives a breakdown of net purchases by foreign entity by month.

Major Foreign Holdings of Treasury Securities

The table MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES, shows total holdings by country by month for the last year. The table is sorted in descending order of the size of the current holdings.

The Fed gives us the following graph through their data base FRED: Federal Debt Held by Foreign & International Investors (FDHBFIN)

Total US Debt

The FRED data series Federal Government Debt: Total Public Debt (GFDEBTN) which is taken from the document United States Central Summary General Ledger Account Balances, p. 16, Liability Accounts, Total Treasury Securities Outstanding, gives a graphical picture of Treasuries outstanding:

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