Flows: Witnessing An Ever-Fading Foreign Dominance In USTs?
(4 min read)
There are a number of market beliefs that develop over time which end up being accepted without question. One of those givens is that foreign investors hold the vast majority of the marketable UST debt outstanding. However, take a closer look at the data and you find that was only really true for a brief 10-year window in time, between 2007 and 2017.
Since then, domestic investors (including the Fed, which is becoming a dominant player in the UST space for numerous reasons) have taken the lead. Now you might say it’s unfair to include the central bank. Fine. Even so, there is now roughly equal ownership between foreign and domestic investors of UST holdings. We explore how this came about.
The Evolution of UST Holders vs Major Events Since 1971 is Revealing
To really understand how we got to where we are, we need to look back over the last fifty years or so to see how the ownership structure of the UST market evolved. For this exercise we used the Z1 data marketable UST debt ownership and took the rest of the world data along with the Fed’s holding levels versus the total to calculate the domestic ratios. Note it’s a simple analysis that captures the trends even if the exact ratio may differ slightly from what the more granular data sets may suggest.
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