If The Fed Sells Treasuries... Who Will Be Buying? Answer: "Other" (Seriously)!

Tyler Durden's picture

Authored by Chris Hamilton via Econimica blog,

From 1776 through 2007, the US issued just over $9 trillion in US Treasury debt to pay for stuff which "we" wanted but "we" were unwilling to tax ourselves to pay for.  The buyers during that period are depicted in the first column of the chart below.  During that time, the majority buyer of that debt was the Intra-Governmental Surplus funds (primarily Social Security) as depicted by the green area in the first column below.  These funds were mandated to buy "governmental accounting series" non-marketable debt.  The remainder of the issuance and holdings were fairly evenly split between foreigners and domestic buyers (primarily institutional buying) with a minor portion of primarily short term Notes and Bills held by the Federal Reserve.

From 2008-->2014, the US Treasury nearly issued as much debt as it had in the previous 230+ years.  But the proportions bought and held by these creditors significantly changed (depicted by middle column in the chart below).  Intra-Governmental surplus funds were dwindling so the buyer of nearly half of all Treasury debt up to that point took a back seat, buying only 8% of the new issuance.  No surprise, it was the Federal Reserve and Foreigners that bought 2/3rds of the issuance, maintaining a strong bid.  The Fed sold all it's short term bills and notes and went large and long.  And foreigners apparently just couldn't get enough.

But since QE ended in late 2014, the make-up of the new buyers / holders of US Treasury debt is totally different (depicted in the right column of the chart below).  Obviously, the Fed Reserve has purchased nothing (on a net new basis...of course they have been buying to replace bonds rolling off, but no net new buying) and since the Fed ceased buying, Foreigners (net) have sworn off US Treasury debt and sold $200+ billion.  So the only buyers for the continuing issuance and the portion not rolled over by foreigners  is the domestic public (with an assist by the dwindling Intra-Governmental surplus).

On a % basis of who bought / held the debt over different periods?  The chart below highlights how completely different the current period is with the domestic public buying 87%, IG buying 25%, and foreigners net selling.

Well, this should beg the question, who among the domestic public is buying all those still near record low yielding Treasury's?  Great question, and according to the latest Treasury Bulletin we have our answer, "Other Investors" (with an assist from mutual funds) are the primary buyers (chart below).  Banks bought a little, private parties less, and insurers even less.  State/local funds sure aren't being used to buy US Treasury's...and US savings bonds are a thing of the past.  Interestingly, the "other" category has nearly doubled since September of 2014 from less than a trillion to $1.8 trillion.  So the Treasury market is supported by "other investors" which unfortunately the Treasury Bulletin provides no more detail about plus mutual funds.  And all this while stock and real estate markets are flush with cash, leveraging indices to record highs despite the trillion plus being pulled away from these sectors to buy Treasury's???  All makes sense to me and I'm sure there's no reason to look further (and I'm pretty sure nobody will)!

And just to play this out, where exactly has that Intra-Governmental surplus (that has made up a quarter of Treasury demand since QE ended) come from?  Clearly not from America's #1 creditor, the aging boomer and their dwindling Social Security surplus.  They are on the verge of turning from a source of credit to deficit (chart below).

Shocker, "Other" is the primary buyer within the Intra-Governmental Surplus, again coming from the Treasury and highlighted in an older post HERE.

I'm not exactly expecting rates to rise anytime soon despite CBO claims that rates are inevitably going up as deficits sky rocket.  Just consider, when the largest Treasury holder (IG) began to slow it's accumulation in '08 coincident with subsequent record '08-->'12 Treasury issuance, foreigners and the Fed took over and rates went down.  As China and the BRICS ceased net buying Treasury debt in July 2011 (and never returned), the BLICS appeared and rates went down (Detailed HERE)As the Fed ceased QE1 and all economists knew rates must rise...rates shocked 100% of economists and fell by a third.  As the Fed tapered and ceased QEIII and foreigners likewise ceased buying Treasury's from '14 onward, "other" took over and rates hardly budged!?!  Not exactly the hallmarks of a "free market".

So no, by hook or by crook, I don't think Treasury rates will be rising anytime soon and are far more likely to fall significantly...despite the Federal Reserve claiming it will start systematically selling off it's trillions in Treasury's...concurrent with foreigners selling...and simultaneous with fast rising Treasury issuance...all while Social Security turns from a surplus to deficit!?!  I don't think the Federal Government nor the Federal Reserve are about to let a "so called free-market" determine the yields paid on America's debt.

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NugginFuts's picture


Yeah this is gonna end well. Thanks Fed! Which way to the bread line?

Arnold's picture

getcha MBS heya!!!
Red hot MBS!!!

J S Bach's picture

Who will be buying?  Why... the Fed, of course!  Ain't monetization of your currency grand?

J S Bach's picture

But wait... that's not all you get!  You'll also receive a nice dose of hyper-inflation in the not-so-distant future.  Order today.  Call 1-800-FED-SCAM.

PAPA ROACH's picture

Maybe that's why The Bernanke went to Citadel. Citadel is a shadow arm of the Fed now?!?!

The Juggernaut's picture

See “The buyer of last resort” means that “We’ll hold the bag with the ticking time bomb”.  Then when they’re holding the bag… they get cold feet.  The Fed is going to blow.  If there is no buyer that's when yields will spike and US debt securites will blow as well.


Who will probably buy is a shell offshore entity.  Its probably to shell/cover a Saudi buyer... now we're talking about petro dollar coordination... in anycase its a GAME OVER!


I mean LOOK at that graph.  The Fed balance sheet should be EXACTLY the same as "Other".  They made "Other" a little higher because you know.... it has to look legit.  Just burn the whole fucker down.

cheka's picture

the frbny branch in brussels will buy them

Dabooda's picture


Invest in your own destruction.

Jack's Raging Bile Duct's picture

My thoughts too. ECB takes out a zero interest loan at the emergency window (no disclosure) and buys USTs. Let the incest continue.

Max Hunter's picture

Remember about 6 years ago when FED was printing 80 billion a month and China said there are limits to what they tolerate when it comes to US monetary policy?  I'm guessing 20 trillion was the limit... Leader of China comes to visit.  We bomb Syria, tell the world we will do whatever the hell we wont.. Plan accordingly.. petrodollar about to get punched in the nose.

Cash Is King's picture

Cmon Roach, that would be unethical! You're better than that!

Ignatius's picture

PCR has pointed out that the Fed has a huge trading desk.

I think that explains "other" buyers.

Arnold's picture

I think ultimately you and I will be buying the unmarketable dog shit.

The rest of the Fed held bonds tuck nicely into portfolios.

My guess is the PPT is constantly feeding equities back into the market through dark pools for profit.

Paul Kersey's picture

Perhaps central banks will buy each other's sovereign debt in some kind of international game of Three-card Monte. We already know that the Swiss Central Bank (SNB) has been buying U.S. stocks, and now holds a record $63.4 billion worth. Central banks have but one central purpose, and that is to keep the world's largest ponzi scheme afloat.

Thinkpad's picture

"We're convinced that given the difficult situation with an overvalued Swiss franc, a negative output gap, and negative inflation, the current approach is the right one - expansion in monetary policy with negative rates and willingness to intervene," he said earlier this month.


The result is that its pile of foreign currency reserves - which rose to the equivalent of 635.3 billion francs ($650 billion) at the end of June from 529.5 billion francs a year earlier and 226.7 billion francs in 2010 - is likely to keep growing.

"The SNB is in a bit of a corner, they have acquired a lot of foreign currency as part of their efforts to weaken the franc and they have to invest it somewhere," said Alessandro Bee, an economist at UBS. "The bond market is drying up and so they are going increasingly for equities."



Thinkpad's picture

Which agencies own the most Treasuries? Social Security, by a long shot. Here's the detailed breakdown (as of December 31, 2016).

  • Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) - $2.801 trillion
  • Office of Personnel Management Retirement - $888 billion
  • Military Retirement Fund - $670 billion
  • Medicare (Federal Hospital Insurance Trust Fund, Federal Supplementary Medical Insurance Trust Fund) - $294 billion



abyssinian's picture

I think the Feds will buy their own bonds back... hahaha Just print more and buy them... 

SMC's picture

It's spring, start a garden.

A. Boaty's picture

No more bread lines. SNAP cards now, i.e., the invisible bread line.

hxc's picture

Not invisible... you see it every time some loser prick asks if the liquor store takes EBT.

I am Jobe's picture


Send em back to the respective states and let the states deal with the crap. Americans are EXCEPTIONAL

chief's picture
so fucking obvious, does anyone really think the buyers in belgium, switzerland and other suspect small countries are real "investors"? - stealth offshore QE. That's why there will be a third world war before the FED is audited.
Yen Cross's picture

  the fed. is caught between a rock and a hard place. They made their bed, and now they get to sleep in it.

 P.S. Belgium?

BlueHorseShoeLovesDT's picture

Trump knows a guy in Chyna, He sold him a condo already.

small axe's picture

Fed will end fractional reserve banking, mandate that banks hold 100% reserve in GOVERNMENT DEBT only...poof, all bonds bought, no more whining about fractional reserve banking, 100% backed by the full faith and worthless credit of the US gov.

Coup complete

aka the Chicago Plan


Winston Churchill's picture

Only after 401k's are forced to hold 100% USTs, with no lump sum out,  only taxable annuities.

hxc's picture

And to think Friedman advocated this kak... disturbing.

100% reserves I like. None of the rest of it. Valueless paper trash. 100% of 0 is still 0

shizzledizzle's picture

Catch ALL the knives!

hotrod's picture

So just like the BOJ the central bank is buying all the debt except in the USA we have disguised it.  QE to infinity

SMC's picture

Thinly disguised monetization for the few seats that are left playing musical chairs.

Rich Stoehner's picture

Can't they just change the numbers on the spread sheet?

buzzsaw99's picture

the cbo saying treasury rates will rise is wishful thinking. they may not be aware that it is wishful thinking, but it is.

Consuelo's picture



"I don't think the Federal Government nor the Federal Reserve are about to let a "so called free-market" determine the yields paid on America's debt."


Yes, correct.    But someone else/s might make that determination - albeit indirectly.   Someone else/s who already has CIPS and the Russian equivalent of SWIFT, and simply continue to lay the foundation for a time when trading (or being threatened with) the $USD is no longer a concern for them.   All that is left is the timing and/or foreign policy aggressions which accelerate the process.  

metanoic's picture

The real kicker is when you take a look at who exactly setup all the fancy new financal infrastructure in Asia. Same old folks !

lester1's picture

The Fed "prints" unaudited electronic money and sends it to ECB > ECB buys US Treasuries and manipulates gold and silver prices via Euroclear in Belgium > Markets are manipulated daily to artificially prop up asset prices as a matter of "national security"


Rinse and Repeat !


- Former Fed insider

Manipulism's picture

One day the Rothschild-Centralbank-Network.Inc will own everything.

GlassHouse101's picture

I'll buy some. I need toilet paper after all.

Fake Trump's picture


Money_for_Nothing's picture

The above is missing somethings. Michael Pettis has shown the trade deficit is directly connected to foreigners buying treasuries. An organization can not buy treasuries unless they have dollars. Which they get by selling something for dollars. Trade is falling. By definition foreign purchases of threasuries must fall.

Also the Federal Reserve allows treasuries to be rehypothecated five times as reported here. If they change the rules to four times then a big market for treasuries could ensue. Failures-to-deliver as reported here show the importance. Interest rates don't matter as much as they use to because of this.

Kayman's picture

"An organization can not buy treasuries unless they have dollars. Which they get by selling something for dollars. Trade is falling. By definition foreign purchases of threasuries must fall."

So, using that logic, unless Americans buy foreign products the dollars disappear?

metanoic's picture

Other = Exchange Stabilization Fund

The banks are dark buying their own debt.

Russia and China are going to need more popcorn for this show, they're sitting pretty on fraudently price supressed physical gold while the West prepares it's own noose.