What information is available about foreign holdings of U.S. Treasury and other securities?

The Treasury International Capital (TIC) reporting system collects data for the United States on cross-border portfolio investment flows, including an annual survey of foreign portfolio holdings of U.S. securities. These data indicate that, as of June 30, 2015, foreign holdings of U.S. securities—both public and private—were approximately $17.1 trillion. Holdings of Treasury securities and U.S. agency debt account for about 40 percent of foreign holdings of U.S. securities (in the TIC data, U.S. agency debt includes debt issued by government-sponsored enterprises). The federal government chartered these to provide financial intermediation for specified public purposes, such as mortgages. Examples include the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Home Loan Banks, the Farm Credit System, and the Federal Agricultural Mortgage Corporation. Although federally chartered to serve public-policy purposes, the government-sponsored enterprises (GSEs) are classified as non-budgetary and excluded from the budget. This is because they were intended to be privately owned and controlled, with any public benefits resulting from their business transactions accruing indirectly.

The remaining amount of foreign holdings (about 60 percent) is split between equities (i.e., stock and shares in investment companies, such as mutual funds) and corporate debt.

Total Foreign Holdings of U.S. Securities (As of June 30, 2015)

Source: GAO analysis of data from the Department of the Treasury, Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve System.

Notes: Data from Report on Foreign Portfolio Holdings of U.S. Securities as of June 30, 2015. The corporate debt category includes small foreign holdings of municipal debt, nonprofit organizations' debt, and certificates of deposit with a maturity of over 1 year. These foreign holdings are consolidated into corporate debt. The U.S. agency debt category includes securities issued by both federal agencies (such as the Tennessee Valley Authority) and government-sponsored enterprises (such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks).

There are some limitations to these foreign ownership data. Specifically, because of the widespread use of financial intermediaries,Firms that borrow from consumers/savers and lend to companies and households that need resources for investment and consumption. the data only identify where the securities are held, which may not be the owner's resident country. For example, a resident of Germany may buy a U.S. security and place it in the custody of a Swiss bank, which will often hold the security at a U.S. resident bank. For the survey, the U.S. bank will report that it is holding the security on behalf of a Swiss bank, not knowing that the owner of the security is German. Consequently, the survey reports large holdings of U.S. securities in major financial centers, such as the Cayman Islands, Switzerland, the United Kingdom, and Hong Kong.

Another limitation is that the survey does not provide insight into how a particular country's holdings are divided between private investors and official institutions, which have different reasons for investing. Foreign official institutions include central banks and national government-owned investment funds. Central banks hold foreign currency reserves to maintain exchange rates or to facilitate trade. While the survey reported that foreign official institutions held 68 percent of foreign holdings of Treasury securities as of June 30, 2015, it does not identify foreign official holdings by country.

Total Foreign Holdings of U.S. Securities by Official Institutions and Private Investors (As of June 2015)

Source: GAO analysis of data from the Department of the Treasury, Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve System.

Notes: Data from Report on Foreign Portfolio Holdings of U.S. Securities as of June 30, 2015.  The corporate debt category includes small foreign holdings of municipal debt, nonprofit organizations' debt, and certificates of deposit with a maturity of over 1 year. These foreign holdings are consolidated into corporate debt. The U.S. agency debt category includes securities issued by both federal agencies (such as the Tennessee Valley Authority) and government-sponsored enterprises (such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks).

What are key reasons for foreign investments in Treasury securities?

For investors in other countries, including central banks, Treasury securities are attractive to hold since they are considered by market participants to be the premium risk-free asset and are liquid. Also, the dollar is considered to be the world's dominant reserve currency:An international currency used by nonresidents as a medium of exchange, a unit of value, and a store of value.

  • The dollar was involved in 88 percent of activity in global foreign exchange markets in April 2016; the euro was second at 31 percent. (Because foreign exchange transactions involve two currencies, total transactions by currency sum to 200 percent.)
  • Reported foreign exchange reserves held by other countries are heavily concentrated in dollars. However, the International Monetary Fund relies on voluntary reporting from countries and not all countries report the currency composition of their reserves.