The buyers of US Treasury bonds fall into five broad groups: foreign governments and central banks, the Federal Reserve, domestic financial institutions, state and local governments, and individual investors. Foreign holders alone owned roughly $9.27 trillion as of December 2025, about 32 percent of publicly held Treasury debt,1U.S. Department of the Treasury. Major Foreign Holders of Treasury Securities while the Federal Reserve held approximately $4.2 trillion in its own portfolio as of February 2026.2Federal Reserve Bank of New York. System Open Market Account Holdings of Domestic Securities Everyone else, from a pension fund in Ohio to a retiree buying I bonds online, fills in the rest.
Foreign Governments and Central Banks
Foreign buyers are the largest single category of Treasury holders outside the federal government itself. Central banks and sovereign wealth funds use Treasuries to hold their foreign exchange reserves, parking trade surpluses in dollar-denominated assets that are highly liquid and considered virtually free of credit risk.
Japan led the list at roughly $1.19 trillion as of December 2025, followed by the United Kingdom at about $866 billion and China at approximately $684 billion. Canada and Belgium round out the top five.1U.S. Department of the Treasury. Major Foreign Holders of Treasury Securities The mix has shifted over time. China’s holdings have declined significantly over the past decade, while the United Kingdom’s position has grown. Foreign governments typically buy through primary dealers or directly at auction, and their steady participation reinforces the dollar’s role as the world’s dominant reserve currency.
The Federal Reserve
The Federal Reserve is one of the single largest holders of Treasury securities. Under federal law, every Federal Reserve bank has the power to buy and sell direct obligations of the United States in the open market, under the direction of the Federal Open Market Committee. The roughly $4.2 trillion in the System Open Market Account, known as SOMA, spans bills, notes, bonds, inflation-protected securities, and floating rate notes.2Federal Reserve Bank of New York. System Open Market Account Holdings of Domestic Securities
The Fed’s motive is different from every other buyer’s. Its purchases and sales are the primary tool it uses to influence short-term interest rates and the broader money supply. Large-scale buying (quantitative easing) adds reserves to the banking system, pushes down interest rates, and encourages lending. Letting securities mature without replacement (quantitative tightening) shrinks reserves and can push short-term rates upward.3Board of Governors of the Federal Reserve System. The Central Bank Balance-Sheet Trilemma The Fed is buying to steer the economy, not to earn a return.
Banks, Mutual Funds, Pensions, and Insurers
Domestic financial institutions are among the most active Treasury buyers, and their reasons vary by institution type.
Mutual funds held roughly $4.4 trillion in Treasury securities as of early 2025, a figure comparable in scale to the Federal Reserve’s own book. Money market funds concentrate on short-term Treasury bills, which lets everyday investors earn a return on cash while keeping daily liquidity. Pension funds and insurance companies favor longer-dated notes and bonds because the predictable interest payments align with their long-term obligations to retirees and policyholders.
Commercial banks buy Treasuries partly by regulatory necessity. Under the Liquidity Coverage Ratio rule, FDIC-supervised banks must hold enough high-quality liquid assets to cover projected net cash outflows during a 30-day stress period.4eCFR. 12 CFR Part 329 – Liquidity Risk Measurement Standards Treasuries qualify as Level 1 liquid assets, the highest tier, and count dollar-for-dollar toward the requirement with no haircut. That makes them the most efficient way for a bank to satisfy the rule.
State and Local Governments
State and local governments buy a specialized non-marketable Treasury product called the State and Local Government Series, or SLGS. These securities exist to help municipalities comply with federal tax rules when they issue their own tax-exempt bonds.5eCFR. 31 CFR Part 344 – U.S. Treasury Securities, State and Local Government Series
The reason is arbitrage. When a city or county issues tax-exempt bonds at a low interest rate, federal law bars it from simply reinvesting the borrowed proceeds at a higher rate and pocketing the difference. Bonds whose proceeds are used to acquire higher-yielding investments can be treated as “arbitrage bonds” and lose their tax-exempt status.6Office of the Law Revision Counsel. 26 USC 148 – Arbitrage SLGS securities give municipalities a compliant place to park bond proceeds at controlled yields while they wait to spend the money on infrastructure or other public projects.
Individual Investors
Private citizens can buy Treasury securities directly from the federal government through TreasuryDirect, an online platform run by the Bureau of the Fiscal Service.7U.S. Department of the Treasury. Bonds and Securities The minimum purchase for any marketable Treasury security (bills, notes, bonds, TIPS, or floating rate notes) is $100, with additional amounts in $100 increments.8TreasuryDirect. FAQs About Treasury Marketable Securities Buying through TreasuryDirect avoids brokerage commissions, though many investors prefer purchasing through a broker so their Treasuries sit alongside other investments in one account.
How Individuals Bid at Auction
Through TreasuryDirect, individuals submit non-competitive bids, meaning they agree to accept whatever rate the auction determines. Non-competitive bids are capped at $10 million per auction. Competitive bids, where the buyer specifies a desired yield, are only available through a bank, broker, or dealer.9TreasuryDirect. How Auctions Work For most individual investors, non-competitive bidding is the simpler and more practical option.
Savings Bonds
Series I Savings Bonds are popular with individual investors because the interest rate adjusts with inflation. As of early 2026, new I bonds paid a composite rate of 4.03 percent, made up of a 0.90 percent fixed rate plus a semiannual inflation adjustment.10TreasuryDirect. TreasuryDirect Home Series EE bonds pay a fixed rate and are guaranteed to double in value if held for 20 years. Both types are capped at $10,000 per person per calendar year in electronic purchases.11TreasuryDirect. How Much Can I Spend/Own
Savings bonds carry restrictions that marketable Treasuries do not. You cannot redeem an I or EE bond during the first 12 months after purchase. Redeem within the first five years and you forfeit the last three months of interest.12TreasuryDirect. Questions and Answers About Series I Savings Bonds After five years, there is no penalty.
What Buyers Are Actually Choosing Between
Every buyer above is picking from the same shelf, though they favor different maturities. Treasury bills mature in 4 to 52 weeks and are sold at a discount to face value with no periodic interest. Treasury notes run 2 to 10 years and pay interest every six months. Treasury bonds run 20 or 30 years on the same semiannual schedule. TIPS come in 5-, 10-, and 30-year terms and adjust their principal for changes in the Consumer Price Index. Floating Rate Notes are two-year securities whose rate resets weekly, tied to the most recent 13-week bill auction plus a fixed spread.13TreasuryDirect. Floating Rate Notes (FRNs) Savings bonds, unlike everything else on that list, cannot be traded on secondary markets. Money market funds cluster in bills; pension funds and insurers stretch out along the long end; the Fed holds across the whole curve.
One Thing Every Buyer Accepts
Treasury securities are considered free of credit risk. The federal government has never defaulted on its debt. They are not free of all risk, though, and this is worth naming because “risk-free” is often read too broadly. When market interest rates rise, the market price of existing fixed-rate bonds falls, because newer bonds offer better yields. Falling rates push existing bond prices higher. The longer the maturity, the sharper the swing: a 10-year note might drop 8 to 10 percent in market value if rates rise by one percentage point, while a 2-year note would barely move.
For a buyer who holds to maturity, those price swings do not matter; the full face value arrives on schedule. For anyone who might need to sell early, or who holds Treasuries through a mutual fund or ETF whose share price tracks current market values, interest rate risk is the real variable to watch.