March 2010 U.S. Treasury Statement and Debt Overview

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The United States’ public debt stood at $14.025 trillion as of the end of December 2010, more than double the level of a decade earlier. As can be seen from the charts above and below, a little over 90 percent of that calendar year-end 2010 debt was held by federal intra-governmental holding accounts (over half of which was comprised of the Federal Old-Age and Survivors Insurance Trust Fund, a.k.a., Social Security), and foreign and domestic investors of various types. The Federal Reserve held the remaining 7.2 percent. China, Japan and the United Kingdom were the three largest foreign holders of U.S. debt.
 

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Interestingly, roughly three-fourths (76 percent) of the debt added during 2010 was underwritten by foreign and private domestic investors. Since Europe’s sovereign debt problems heightened during that timeframe, we suspect safe-haven buying of U.S. Treasuries was an important explanation for why those investor classes behaved as they did.
 

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The debt picture has continued to worsen since December. The total public debt outstanding grew to $14.270 trillion by the end of March 2011, a change of $245 billion in just three months. Because the debt is growing, tax receipts since the beginning of FY2011 (i.e., October 1, 2010) obviously have not kept pace with budget outlays. Indeed, the red ink deepened again in March as outlays of $339.0 billion and receipts of $150.9 billion added another $188.2 billion to the federal budget deficit.
 

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Foreigners have been stepping into the funding gap. The amount of U.S. public debt held by foreigners is homing in on $4.5 trillion. China remained the largest foreign creditor in February ($1.154 trillion) despite selling $0.6 billion of Treasury securities. Great Britain, on the other hand, purchased $17.6 billion in February -- a 6.3 percent increase from January.
 

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The Federal Reserve has surpassed both China and Japan in terms of U.S. Treasury holdings ($1.213 trillion). Furthermore, were the Fed to maintain its February rate of Treasury purchases for a year, it would essentially double its current holdings. As mentioned above, China was a net seller in February, while Japan’s pace of purchases was comparatively slow. As mentioned above, the U.K.’s pace of purchases picked up in February, and would nearly double its holdings if maintained for another year.

More recent data shows the Fed has ramped up purchases of U.S. Treasury debt since February, and held $1.375 trillion as of mid-April.
 

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The rising three-month-average net inflows shown by the Treasury International Capital (TIC) accounting system indicate that more money flowed into the United States than flowed out in February. Net inflows jumped by $67 billion, raising the moving average to nearly $60 billion per month.