The market valuation of U.S. government bonds traded in the open market is 24.4 trillion at the end of 2023 (26.3 trillion at par minus 1.8 trillion in losses due to securities impairment under the Fed's rate hike trajectory).
Analysis of Holder Composition
The largest holders of Treasuries are (based on portfolio composition and current market prices):
- Nonresidents - 8 trillion;
- Fed - 4.4 trillion;
- Households plus mutual funds, excluding money market funds - 3.7 trillion;
- Investment funds, brokers, and dealers, including money market funds - 3.3 trillion;
- Public funds - 2.2 trillion (municipal government, municipal pension funds, state-owned enterprises);
- Commercial banks - 1.5 trillion;
- Insurance and pension funds - 1.1 trillion;
- Non-financial companies - 0.2 trillion.
Evaluation of Holder Structure Changes Since Q1 2022
If we evaluate the structure of holders of Treasury bonds since Q1 2022 (when the tightening of the DCP began), the two major holders are reducing their presence relative to the market size: the Fed reduced its share from 25.7% to 18.1%, and non-residents reduced their share from 33.5% to 32.5%, i.e. in aggregate the largest holders reduced their share from 59.2% to 50.9%.
There is also insufficient support from commercial banks, whose share fell from 7.3% to 6.2%, and insufficient activity from public funds and non-financial companies.
Conclusion
Households and investment funds bolstered the market, with their combined share rising by 8.5 percentage points. Among them, households and mutual funds saw a 5.5 percentage point increase, while money market funds also gained prominence.
The market's reliance on households stems largely from the reserves accumulated during 2020 – 2021 in the form of excess savings. However, the current trajectory is heading downward as the savings rate hovers near historic lows.