Real Insight. Real Estate.

In an effort to keep the U.S. economy from falling into depression, we have seen the Federal Reserve issue a large volume of Treasury securities recently.  There is always a danger of oversupply of such securities, so we thought we’d stop and take a look at where the demand for U.S. debt is coming from.  The following is a list of the Top 10 Holders of U.S. Debt as published by the Treasury Department.  The figures reflect the Department’s data through May 2009 (June 2009 figures have not yet been published).

1.  China (Mainland)
Total Holdings: $801.5 billion
China has been the largest holder of U.S. Treasury securities since September 2008 when it overtook Japan as the largest holder of U.S. debt.  Despite its threats to do the contrary, the economic behemoth continues to be a net buyer of U.S. Treasurys.

2.  Japan
Total Holdings: $677.2 billion
Since the Great Depression, Japan has been the largest holder of U.S. debt.  The Japanese have always expressed complete faith that the U.S. will meet it debt obligations.  This view has begun to change with several leading Japanese economists.

3.  Caribbean Banking Centers (Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama, and British Virgin Islands)
Total holdings: $194.8 billion
U.S. debt holdings in the Caribbean give an indication of hedge fund appetite for Treasurys.  After taking a heavy hit at the beginning of this year, hedge fund demand has undergone a steady rebound in 2009.

4.  Oil Exporters (Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria)
Total holdings: $192.9
Net exporters of oil generally store their export dollars in U.S. Treasurys.  The rise of U.S. debt holdings in these countries in 2009 is a reflection of  heavier volume of oil exports to the U.S. this year.

5.  United Kingdom
Total holdings: $163.8 billion
The U.K.’s holdings of U.S. debt have increased dramatically in 2009, indicating that perhaps the world’s developped economies have an improved view of the safety of U.S. Treasurys as compared to the end of 2008.

6.  Brazil
Total holdings: $127.1 billion
It appears that Brazil is maintaining its strategy of reducing holdings of U.S. debt .

7.  Russia
Total holdings: $124.5 billion
Like Brazil, Russia has adopted a policy of reducing its load of U.S. debt.  Russia’s reduction program, however, has been less programatic than Brazil’s and is a reflection of the nation’s precarious economic state.

8.  Luxembourg
Total holdings: $96.3 billion
A traditional tax haven, the sell off of U.S. debt in this nation may imply that investors are ready to take more risk by placing their capital higher yielding securities.

9.  Hong Kong
Total holdings: $93.2
Another net exporter of goods to the U.S., Hong Kong’s increase of U.S. debt holdings in 2009 may be a reflection of the nation’s view that trade with the U.S. may begin to increase in the latter half of the year.

10.  Taiwan
Total holdings: $75.7
Since reducing its holdings after the U.S. economic fallout in the middle of 2008, Taiwan has maintaned a relatively stable holding of U.S. Treasurys.  As one of the U.S. largest trade partners, the nation’s holdings of U.S. Treasurys gives an indication of the level of trade activity between Taiwan and the U.S.

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