Introduction to Finance

Nonmarketable
government securities
are 
dealer system 
a small group of 
dealers in government securities 
with an eff ective marketing network 
throughout the United States
nonmarketable government 
securities 
securities that cannot 
be transferred between persons or 
institutions and must be redeemed 
with the U.S. government

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8.3 Default Risk-Free Securities: U.S. Treasury Debt Instruments
201
securities that cannot be transferred to other persons or institutions and can be redeemed only 
by being turned in to the U.S. government. The sheer size of the national debt, over $18 trillion 
at the end of fi scal year (September) 2015, makes the fi nancing process a diffi
cult one. In fact, 
the United States must rely on the willingness of foreign and international investors to hold a 
substantial portion of the outstanding, interest-bearing public debt securities issued to fi nance 
the national debt. 
The ownership of U.S. Treasury securities, by group or category, is shown in 
Table 
8.1
. Private investors, who owned approximately 48 percent of the total outstanding 
Treasury securities in 2006, increased their ownership to over 57 percent by 2011 and to 
nearly 59 percent by 2015. The percentage of Treasury securities held by U.S. govern-
ment accounts (agencies and trust funds) and Federal Reserve banks dropped from about 
52 percent in 2006 down to about 41 percent in 2015. During the time period depicted 
in Table 8.1, foreign and international investors increased their holdings of total public 
debt from about 25 percent in 2006, to 28 percent in 2008, about 32 percent in 2011, and 
nearly 34 percent in 2015. This shows the continuing importance of foreign and interna-
tional investors in fi nancing the U.S. national debt. Except for the miscellaneous investor 
category, only mutual funds held as much as 6 percent of the outstanding amount of 
Treasury securities in 2015.
During the last half of the 1980s, the annual increase in foreign ownership was due 
primarily to the fl ow of Japanese capital to this country. Japanese investment in real estate 
and corporate securities has been well publicized. However, as the dollar declined relative to 
the Japanese yen and other major foreign currencies, investment in U.S. assets became less 
attractive after interest and other returns were converted back into the foreign currencies. In 
recent years, interest on the part of Europeans and Chinese has increased. The large trade 
surpluses China has had with the United States have resulted in the Chinese holding ever-
increasing amounts of U.S. fi nancial assets.