U.S. TREASURY DEBT FINANCING CRISES:
Foreign Liquidation of US government Debt: Especially China dumping its vast holding of US government debt
U.S. Government Redemptions: To pay soaring social security costs as baby boomer retire in mass.
Treasury Buybacks, and Upward Pressure on the Long End of the Yield Curve: Financing costs of the national debt are soaring. In 2022 interest Payments on the national debt was 717.6 billion at a interest rate of 1.5%. Now for 2026 interest payments on the national debt are projected to be 1.28 trillion a 78% increase. The reasons I say projected that’s at the present interest rate of 3.45% Whats got the Treasury shitting all over their pint stripe suite is the rate is rising and if they don’t intervene it could be over 5%. Right now just the interest payment on the national debt is the largest budjet item and climbing
As a footnote
Janet IDIOT Yellon could have financed the nationl debt decades in the future using Treasury Bonds at 1.25%, Mss Stupid Ass chose to do the bulk of financing in the short term T Bill market
Prepared: August 25, 2026
Executive Summary
The U.S. Treasury market is undergoing an important structural change. The federal government must finance large and persistent deficits while several historically important holders of Treasury securities are no longer providing the same degree of support they once did. And in fact are liquidating their holdings.
China was the largest holder of US treasuries represents the most dramatic example of the dumping US government debt. Chinese holdings of U.S. Treasury securities reached approximately $1.32 trillion at their peak in 2013 and have subsequently fallen to roughly $633 billion, representing a reduction of approximately $687 billion, or more than half of the peak position.
Japan, now the largest foreign holder of Treasury securities, has also moved below its historical peak. Japanese holdings reached approximately $1.3 trillion at their high and subsequently declined now standing at $1.1 trillion, although the reduction has been considerably smaller than China’s.
At the same time, U.S. government trust funds—particularly Social Security—are redeeming Treasury securities to fund benefit payments. When an intragovernmental Treasury security is redeemed and the government does not have sufficient incoming cash to cover the payment, Treasury may ultimately have to obtain that cash through additional borrowing from the public.
Against this background, Treasury has developed and expanded its Treasury-security buyback program. One important question examined in this report is whether increased Treasury purchases of older, longer-dated securities may partly offset deteriorating liquidity or selling pressure in portions of the Treasury market.
The central issue is therefore larger than China alone. It involves the interaction of:
- Foreign demand for U.S. Treasury securities;
- China’s substantial reduction in reported Treasury holdings;
- Changes in Japanese and other major foreign portfolios;
- Redemptions of Treasury securities held by federal trust funds;
- Large federal deficits and increasing Treasury issuance;
- Treasury’s own buyback operations; and
- The resulting effect on long-term Treasury yields and market liquidity.
The evidence does not, by itself, establish that Treasury initiated or expanded its buyback program specifically because China was selling Treasury securities. However, China’s approximately half-trillion-plus reduction from its historical peak is sufficiently large that it should be considered as part of the broader transformation in the investor base supporting the U.S. Treasury market.
1. The Central Question Why is Treasury in a PANIC?
The question underlying this analysis is straightforward:
The U.S. Treasury increasingly being forced to compensate for the withdrawal or reduced participation of major traditional buyers of U.S. government debt. Treasury announced a rare move Quantum Buying of US Government Bonds:
United States Treasury Secretary Scott Bessent Announced he is taping into the $1 trillion General Account to support government bond buybacks. The account functions as the US government’s primary checking and operating account and is held at the Federal Reserve Bank of New York. Treasury revealed it would repurchase at least $4 billion worth of bonds. US Treasury Secretary Scott Bessent told CNBC that the Treasury’s long-end debt buyback operations could exceed the newly announced floor of $4 billion per issue. “We’re going to increase the size of the buyback,” he said. “I would note that it could be more than the $4 billion per issue.” The liquidity support will start September 9 and stay in effect through November 4.
This clearly a sign of desperation. The last time Treasury Bond yields were this high was during the 2007 financial crises
China provides the clearest case study of the emerging debt crisis as buyers are selling out of US Treasury bonds. China reported its Treasury portfolio has fallen by more than 50 percent from its historical maximum.
But China cannot be examined in isolation. Treasury must continuously find buyers for enormous quantities of securities created both by refinancing maturing debt and financing new federal deficits.
Consequently, even if total foreign Treasury ownership remains high—or increases in nominal dollars—the identity of the buyers, their maturity preferences, and their willingness to absorb additional long-duration securities can have important consequences for the Treasury yield curve.
2. China: The Major Reduction
China accumulated an enormous portfolio of U.S. government securities during the decades in which it generated substantial trade surpluses and accumulated foreign-exchange reserves.
Reported Chinese Treasury holdings eventually reached approximately:
Peak: $1.32 trillion
Reported holdings subsequently fell to approximately:
Current level discussed in this analysis: $633 billion
That represents an unprecedented reduction of:
$687 billion
or approximately:
52 percent of the peak portfolio.
This is not a marginal portfolio adjustment. It represents a fundamental change in China’s participation in the Treasury market. And is causing near panic at Treasury. Of course they will never admit it in public.
The important analytical question is not simply whether China has “sold Treasuries.” It is which maturities were reduced, when those reductions occurred, and whether other investors replaced China’s demand at comparable yields. The answer is mostly bonds. And the Fed through its Quantum Bond Buying was forced to intervene.
When China a major price-insensitive official buyer withdraws from the market, another investor must ultimately hold those securities. Those investors are getting the highest yields in 20 years. Its still not enough hence Treasuries intervention.
3. Japan
Japan remains one of the world’s most important holders of U.S. Treasury securities.
Its Treasury portfolio reached approximately:
Peak: $1.3+ trillion
The level discussed in our analysis was approximately:
$1.1 trillion
This places Japan roughly $200 billion below its historical maximum, depending upon the precise month selected for the comparison.
Japan therefore has not reduced its Treasury portfolio on anything approaching China’s percentage scale.
Nevertheless, Japan is important because Japanese institutions face their own domestic interest-rate environment, currency-hedging costs, and capital requirements. Changes in those conditions have materially alter the attractiveness of U.S. Treasury securities to Japanese investors.
4. Major Foreign Holders of US Treasuries
The five large foreign holders are:
| Holder |
Approximate Holdings |
| Japan |
$1.12 trillion |
| United Kingdom |
$940 billion |
| China |
$633 billion |
| France |
$499 billion |
| Canada |
$460 billion |
China is the clear outlier when the current positions are compared with historical peaks.
Japan is also below its peak, while several other major financial centers have remained comparatively close to their record holdings.
An important qualification is necessary: Treasury International Capital data identify holdings primarily according to the country through which securities are held. Financial centers such as the United Kingdom can therefore include securities beneficially owned by investors located elsewhere.
5. Federal Government Trust Funds
Foreign governments are only one component of Treasury ownership.
Federal government accounts themselves hold trillions of dollars of Treasury securities. These are generally classified as intragovernmental holdings.
Major accounts discussed in our analysis include:
| Federal Account |
Approximate Treasury Holdings |
| Social Security Trust Funds |
$2.5–$2.6 trillion |
| Military Retirement Fund |
~$2.1 trillion |
| Civil Service Retirement Fund |
~$1.1 trillio |
| Defense health-related fund |
~$450 billion |
| Medicare Trust Funds |
~$390 billion |
Social Security is particularly important.
Its Treasury holdings previously approached approximately $2.9 trillion. As benefit payments increasingly exceed Social Security Tax cash inflows, the trust funds has been redeeming Treasury securities to obtain cash.
This has an important financing consequence.
The Treasury security held by Social Security represents an asset to the trust fund and a liability to Treasury. THE FUNDS ARE NOT HELD IN TRUST. When Social Security redeems that security, Treasury must provide the cash. To the extent that current government receipts are insufficient, Treasury must obtain financing elsewhere. EVEN MORE PRESSURE ON T REASURY TO PROVIDE LIQUIDITY
Thus, a reduction in intragovernmental holdings can coincide with an increase in debt that must be financed through the public Treasury market or as a last resort Quantum Bond Buying
6. Why This Is Putting Pressure on Treasury Yields
Bond prices and yields move inversely.
If the quantity of Treasury securities offered to investors rises faster than investor demand at existing prices, Treasury securities must become more attractive to buyers.
That generally means:
Lower bond prices → higher yields. As we are now seeing
Several forces can therefore operate simultaneously:
Large federal deficits increase the amount Treasury must borrow.
Maturing debt must continually be refinanced.
Reduced participation by major foreign official holders can remove an historically important source of demand.
Federal trust-fund redemptions can shift financing requirements toward publicly held debt.
Inflation uncertainty causes investors to demand additional compensation for holding long-duration fixed-income securities.
Term premium can rise as investors demand greater compensation for committing capital for ten, twenty, or thirty years.
The combined result can put persistent upward pressure on longer-term Treasury yields even when the Federal Reserve is not raising its short-term policy rate.
7. Treasury Buybacks
Treasury buybacks introduce another important element.
Under a buyback operation, Treasury purchases outstanding Treasury securities in the secondary market.
The stated objectives include improving liquidity and Treasury-market functioning, particularly for older or less-liquid securities, and improving Treasury’s cash-management capabilities.
The existence of buybacks does not mean that the federal government is permanently eliminating an equivalent amount of debt. Treasury can issue new securities while purchasing older securities.
Economically, therefore, the operation can resemble a restructuring of the government’s outstanding debt portfolio rather than conventional debt retirement.
This distinction is critical.
A Treasury buyback can create additional demand for particular securities and improve liquidity in portions of the market while Treasury simultaneously continues issuing enormous quantities of new debt.
8. Treasury Buybacks Are Compensating for Chinese Selling And record US debt creation
This is the revelation that originally prompted our discussion and this report.
There is an economically plausible transmission mechanism:
China and other major holder are selling long-duration Treasury securities → secondary-market supply has increase to record levels → prices weaken → yields are at 20 year highs → liquidity is deteriorating rapidly → Treasury is purchases selected outstanding securities through its Quantium Bond buyback program.
Of Course The Don”t Want you to Know
Treasury specifically designed a buyback operation to counter Chinese liquidation and Increasing debt creation. The evidence is obvious:
China’s large reduction in Treasury holdings is one component of a broader change in Treasury demand that raising rates and curtailing demand. This has created the market environment in which Treasury buybacks are being conducted.
9. Have Total Foreign Holdings Collapsed?
No. At lest not yet! Treasury has got to act now to save the system
This is one of the most important distinctions in the analysis.
Although China has dramatically reduced its reported holdings, aggregate foreign ownership of Treasury securities has not fallen correspondingly.
Other foreign investors have absorbed substantial quantities of Treasury debt. But still not enough
Therefore, the argument can be made:
“Foreign investors could abandoned Treasury securities.”
Reality is:
The composition of foreign Treasury ownership has changed substantially, with China withdrawing hundreds of billions of dollars while other foreign and private investors have replaced that demand. And US deficits are skyrocketing
That distinction has implications for yields because different classes of investors have different objectives and price sensitivities.
A foreign central bank accumulating reserves may purchase Treasuries for reasons very different from a hedge fund, pension fund, commercial bank, insurance company, or private asset manager.
10. Conclusion
The U.S. Treasury market is not facing a single isolated problem. It is undergoing a transition in the structure of demand for federal debt.
China has reduced its reported Treasury portfolio by approximately $687 billion from its historical peak, representing a decline of more than 50 percent.
Japan is also below its historical maximum, although by a substantially smaller percentage.
Social Security’s Treasury portfolio has declined from its peak as the system increasingly redeems securities to finance benefits.
At the same time, federal deficits require Treasury to issue enormous quantities of additional securities.
These developments mean that an increasingly large amount of Treasury debt must ultimately be absorbed by investors willing to purchase it at prevailing market prices. Or bought back by Treasury.
Treasury’s buyback program should be viewed within this broader environment. The program is to support liquidity in selected securities and portions of the yield curve, but it does not eliminate the government’s underlying financing requirement.
The crucial question going forward is therefore not merely:
“Is China selling?”
It is:
“At what yield will the marginal investor be willing to absorb the enormous and growing supply of U.S. Treasury securities?”
That question goes directly to the future behavior of long-term U.S. interest rates, Treasury financing costs, and ultimately the sustainability of the federal government’s debt-service burden.
And Things do not look good! This will ultimately require double digit negative interest rates.
I hope you know what to do. If you look into the Abyss you will see the greatest global debt wipe out ever.
And the greatest money making opportunity ever. Four generations of debt creation and wealth are about to change hands.
Nick Guarino