In this article, we will be analyzing the foreign-owned US debt during prevailing global conditions, while covering the top 20 countries that owe the US money. If you wish to skip our detailed analysis, you can move directly to theTop 5 Countries that Owe the US Money.
Foreign-Owned US Debt: An Overview
The US government owes money to governments, central banks, companies, and individual investors around the world. Asreported by the US Department of the Treasury, the US owes a total of $7.4 trillion in Treasury securities to foreign countries. Foreign countries buy US Treasury securities since they are considered as one of the most secure assets. Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial. Furthermore, these securities also give a higher rate of return relative to other government bonds.
During the pandemic, the US foreign-owned debt declined as both official and private sector foreign investors contributed $417 billion of net sales in the U.S. Treasury securities in March 2020. Since the pandemic created a demand for more liquid capital assets, private investors ended up selling longer-term US Treasury notes and bonds. The crisis also made Saudi Arabia, China, and Brazil sell their shares of US Treasurys for short-term capital. You can also take a look at some of thecountries with the most debt.
Global Scenario Amidst Rising Interest Rates
On October 10, the IMFreported that central banks around the world are keeping interest rates high in an attempt to tame inflation. This tight monetary policy is making debt expensive for borrowers which could even lead to defaults. Low-income economies are facing trouble with borrowing in hard currencies like the euro, yen, US dollar, and UK pound. Government bonds in emerging economies are also being issued at higher interest rates. This is impacting the corporate side of the world as well. Companies inboth advanced and emerging market economies are struggling to pay their interest expenses. The situation is even grim for financially weaker firms who borrow from the leveraged loan market since defaults have been increasing. Countries with the most external debt have also been previously covered.
On the contrary, sectors that generally benefit from rising interest rates include financial and brokerage firms since their profit margins tend to expand in this case. Some of these include The Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Goldman Sachs Group, Inc. (NYSE:GS). Let’s look at what these firms have been up to.
The Bank of America Corporation (NYSE:BAC) is a multinational investment bank and financial services holding company. It is one of the largest banking institutions in the world. On October 17, the Bank of America Corporation (NYSE:BAC) reported earnings for the fiscal third quarter of 2023. The company reported earnings per share of $0.90, beating EPS estimates by $0.08. Revenue for the quarter amounted to $25.17 billion, up 2.71% year-over-year and ahead of revenue consensus by $93.31 million.
JPMorgan Chase & Co. (NYSE:JPM) is a leading American multinational financial services company that serves worldwide. The company has recently forecasted positive growth prospects for its payments business. On November 15, Bloombergreported that the digital token JPM Coin has been expected to make $10 billion in daily transactions in the coming year. JPMorgan Chase & Co.'s (NYSE:JPM) Global Head of Financial Institution Payments is hopeful regarding a substantial growth in daily transactions over time.
Goldman Sachs Group, Inc. (NYSE:GS) offers services related to investment banking, prime brokerage, asset management, and wealth management. On November 15, the companyannounced the latest fund launched through the Goldman Sachs ETF Accelerator with the listing of the first exchange-traded fund by GMO, a global investment manager.Leveraging the potential of the rapidly growing ETF industry, the GoldmanSachs ETF Accelerator business enables clients to launch, list, and manage their ETFs. On October 17, Goldman Sachs Group, Inc. (NYSE:GS) reported its financial results for the fiscal third quarter of 2023 that exceeded analysts’ estimates on stronger-than-expected trading revenue.The decline in trading of currencies, commodities, and credit was balanced out bystrength in interest rate products and mortgages. The group reported earnings per share of $5.47 and generated a revenue of $11.82 billion, outperforming revenue consensus by $685.36 million.
In order to compile a list of the top 20 countries that owe the US money, we acquireddata from the US Department of Treasury which issues information related to the major foreign holders of US treasury securities. The most recent data is available from January 2023. Hence, we used the total debt held by each of the countries as our metric and ranked the countries in ascending order of the money they owe to the United States.
Top 20 Countries that Owe the US Money
20. Bermuda
Total Debt Held: $77.4 Billion
As of January, Bermuda owes a total of $77.4 billion to the United States. Hence, the country ranks as one of those that owe the US money. The government of Bermuda is trying to move towards an overall budget surplus and a reduction in the national debt.
19. Germany
Total Debt Held: $91.3 Billion
Germany is another country in Europe that owes money to the US. The United States has been a major creditor to the country in the past as well. As of January, the amount owed by Germany to the US is $91.3 billion.
18. Norway
Total Debt Held: $104.4 Billion
Norway is another major US debt holder from Europe. As of January, Norway owes $104.4 billion to the United States. Thus, Norway ranks as one of the countries that owe the US money.
17. Korea
Total Debt Held: $105.8 Billion
The 20 countries that owe the US money include Korea as well. As of January, the country owes a total of $105.8 billion to the United States. Korea’s external debt has also been increasing in recent years.
16. Saudi Arabia
Total Debt Held: $111 Billion
Saudi Arabia owed $111 billion to the United States thereby qualifying as one of the top 20 countries that owe the US money. However, the country sold over $3 billion of US government debt in June since it is investing more in riskier assets.
15. France
Total Debt Held: $183.9Billion
France is another nation that borrows money from the US. As of January, France owes $183.9 billion to the US. This makes it another top nation that owes the US money. The French history of taking debt is old and can be traced back to the French Revolution and the Napoleonic era.
14. Singapore
Total Debt Held: $187.6 Billion
The total amount owed by Singapore to the US is $187.6 billion. This ranks the country among those who owe money to the United States. The sovereign debt per capita is also high in Singapore.
13. Brazil
Total Debt Held: $214 Billion
Following the United States, Brazil is one of the largest economies in the Western Hemisphere. As of January, Brazil owes a total of $214 billion to the United States thereby making it to the top 20 countries that owe the US money.
12. Hong Kong
Total Debt Held: $226.8 Billion
Hong Kong ranks as another top nation that has borrowed money from the US. As of January, the nation owed $226.8 billion to the US.Hong Kong has pegged its currency to the US dollar which is supported by this debt.
11. India
Total Debt Held: $232 Billion
India owes $232 billion to the United States, as of January. This makes the country qualify as one of the top 20 countries that owe the US money. The US treasury securities are deemed as a safe investment for the country.
10. Taiwan
Total Debt Held: $234.6Billion
Taiwan has a large trade surplus with the US. It is also a major US debt holder since it owes $234.6 billion to the country, as of January. This ranks Taiwan as one of the top 20 countries that owe the US money.
9. Ireland
Total Debt Held: $253.4 Billion
Ireland is another European country that owes money to the US. As of January, the country owes $253.4 billion to the US. Ireland is also a known destination for investment by US companies due to its favorable business environment.
8. Canada
Total Debt Held: $254.1 Billion
Based on shared geography and economic ties, Canada is one of the closest allies to the US. The country owes $254.1 billion to the United States, as of January. This makes it another major US debt holder.
7. Cayman Islands
Total Debt Held: $285.3 Billion
The Cayman Islands is a relatively smaller country that owes $285.3 billion to the United States, as of January. This ranks the country among other nations that owe the US money. Furthermore, there are numerous domiciled investment firms in the Cayman Islands that invest in US debt.
6. Switzerland
Total Debt Held: $290.5 Billion
With a debt of $290.5 billion, Switzerland ranks as one of the top countries that owe the US money. Investors in Switzerland have also increased their holdings of US debt. The country’s other main creditors include countries such as Germany and France.
