A brother asked, the liquidity framework for secondary market trading of US Treasury bonds is still unclear, How much money does the United States owe to countries? Or do you owe money to the whole world? How to repay the interest generated by US bonds? How does the United States repay its debts? Will I owe money and not pay it back? I still don't understand this, I hope you can explain it to me. For this reason, I purposely talked for three hours to sort out this chart, so that my brothers can quickly understand the detailed overview of the trading process of the secondary market of US treasury bond bonds. one ️⃣ Question 1: How much does the United States owe? According to the latest data, it has exceeded $36 trillion and is still growing, The so-called American treasury bond refers to the debt accumulated by the federal government of the United States, and has nothing to do with the debt of state governments. The US Treasury Department raises funds through the issuance of "American treasury bond Securities", mainly in three forms, namely T-Bills, T-Bonds and T-Notes. two ️⃣ Question 2: Who are the creditors of US Treasury bonds? It's simple, whoever lends you money is your creditor. Similarly, whoever lends money to the US government is the creditor of US debt. In other words, individuals, groups, governments and institutions holding US treasury bond are the creditors of US treasury bond. These creditors mainly fall into two categories: 1. Domestic creditors in the United States hold approximately 67% of the total US debt, and the largest proportion is owed to their own people. These creditors include: US government departments (about 25%): such as social security trust funds, federal retirement funds, etc. The Federal Reserve System of the United States (the Federal Reserve for short, the United States has no central bank, and the Federal Reserve is similar to the central bank) (about 20%): the Federal Reserve purchases treasury bond to implement monetary policy. Private investors in the United States (about 22%): including banks, companies, pension funds, individuals, etc. in the United States. 2. Foreign creditors The foreign holders of US treasury bond account for about 33% of the total treasury bond. These creditors are mainly many countries and institutions around the world. The latest data shows that the top creditors are: Japan (about US $1.1 trillion): currently the largest holder of US treasury bond bonds in the world. China (about US $770 billion): its holdings have gradually decreased in recent years, and it was once the largest holder of US treasury bond. The UK (approximately 650 billion US dollars). Luxembourg, Switzerland, Belgium, Ireland, Saudi Arabia, South Korea, etc. In fact, many countries and institutions in the world hold more or less U.S. treasury bond. From this perspective, the United States really "owes the world money", but most of the debt is actually owed to its own citizens and government departments. three ️⃣ Question 3: Who pays the interest on US treasury bond bonds? The United States needs to pay a large amount of interest on treasury bond every year. At present, the interest expenditure on treasury bond of the United States has exceeded 1 trillion dollars every year. This money is mainly paid to: Holders within the United States (government departments, banks, pension funds, individual investors). Foreign governments and investors (such as Japan, China, and other countries holding US bonds) can also earn interest income. The interest payment method of treasury bond depends on the type of treasury bond: 1. Treasury Bills (T-Bills) Deadline: 4 weeks, 8 weeks, 13 weeks, 26 weeks, 52 weeks Payment method: This kind of treasury bond is issued at a discount without regular interest payment, and will be paid at face value when due. For example: You buy a T-Bill with a face value of $1000 for $980; When it expires, the government will refund you $1000; The $20 price difference is your interest. 2. Treasury Notes&Treasury Bonds Deadline: T-Notes: 2-year, 3-year, 5-year, 7-year, 10-year Treasury long-term bonds (T-Bonds): 20 years, 30 years Payment method: These treasury bond pay interest every half a year (six months) and repay the principal until the maturity date. For example: You bought a 10-year treasury bill with a face value of $1000 and an annual interest rate of 5%; I will receive 25% interest every six months (1000 × 5% ÷ 2); After 10 years, you have received a cumulative interest of 500 and received a principal of 1000 upon maturity. 3. Treasury Inflation Protected Securities (TIPS) Deadline: 5 years, 10 years, 30 years Payment method: The principal of TIPS will be adjusted based on inflation (CPI index), Interest is paid every six months, but the interest is calculated based on the adjusted principal, so it will vary with inflation. four ️⃣ Question 4: How does the United States manage its debt? The United States will not pay off its treasury bond in a lump sum, but manage its debt in the following ways: 1. Issuing new debt to repay old debt (rolling lending): The United States continuously issues new treasury bond to repay old treasury bond, which is a widely used global way of government financial management; 2. Tax revenue: the part of tax (such as income tax and enterprise tax) collected by the government from enterprises and individuals every year is used to pay the interest of treasury bond; 3. Inflation: As the US dollar is the world's main reserve currency, the United States can reduce the pressure of actual debt repayment by devaluing its currency to make old debts "cheaper". five ️⃣ Question 5: What is the issuance method of US bonds? 1. Issued through the auction market (main method) The US Treasury Department issues treasury bond through public competitive auctions, which are divided into two types: Competitive Bidding: Institutional investors (such as banks, fund companies, foreign central banks) can submit interest rates and amounts they are willing to pay, and the Ministry of Finance selects the appropriate bid based on demand. Non Competitive Bidding: Small investors can purchase at a government set rate of return without bidding, making it suitable for individual investors. These treasury bond will be purchased by financial institutions, pension funds, enterprises, and even foreign governments, and then circulated to the secondary market. 2. Trading through the secondary market (open market) US treasury bond bonds can be freely traded in the financial market, and investors can buy and sell them in the market. The main trading venues include: The New York Stock Exchange (NYSE) Electronic trading platforms (such as Bloomberg, Tradeweb) Securities firms and interbank markets This means that anyone (US citizens or foreigners) can buy US treasury bond bonds through brokers or banks. 3. Purchase directly through the official website of the US Treasury Department American individuals or institutions can directly purchase treasury bond on the website of the Ministry of Finance, which is one of the simplest ways, without going through banks or brokers. 4. Purchase through the Federal Reserve (central bank) (special circumstances) The Federal Reserve will also purchase US treasury bond bonds, which are mainly used to implement monetary policies, such as: Quantitative easing (QE): The Federal Reserve purchases treasury bond to increase market liquidity and lower interest rates. Table shrinkage (QT): When the Federal Reserve wants to tighten the money supply, it will reduce the purchase or sale of treasury bond bonds held by treasury bond. 5. Foreign governments and central banks purchase Governments and central banks around the world (such as China, Japan, and European countries) will purchase US treasury bond bonds mainly because: Holding US dollar reserves to stabilize the value of the domestic currency. To ensure the safety of assets, US treasury bond bonds are regarded as one of the safest investments in the world. These treasury bond are generally purchased through the auction market or the secondary market, rather than being specifically issued. Then another question, why does the United States not pay off the treasury bond at one time? Because they manage debt through the following methods: 1. Issuing new debt to repay old debt (rolling lending): The United States continuously issues new treasury bond to repay old treasury bond, which is a widely used global way of government financial management; 2. Tax revenue: the part of tax (such as income tax and enterprise tax) collected by the government from enterprises and individuals every year is used to pay the interest of treasury bond; 3. Inflation: As the US dollar is the world's main reserve currency, the United States can reduce the pressure of actual debt repayment by devaluing its currency to make old debts "cheaper". five ️⃣ Question 6: Will the United States default on its debts? Although the number of US treasury bond is huge, whether it is "too big to bear" or not should be concerned by Americans. What we should be concerned about is whether it will be "unpaid". However, there has never been a "unpaid" or "unpaid" crisis in the United States in history. At present, the credit of US debt is still strong, the market purchase intention is still high, and it is still the most stable investment and financing tool in the world.