US Treasury bonds are bought by a wide mix of holders: the Federal Reserve, foreign central banks and governments, US commercial banks, mutual funds, pension funds and insurers, state and local governments, and individual households. As of December 2025, foreign investors alone held roughly $9.3 trillion in Treasury debt, and the Federal Reserve’s portfolio contained about $4.2 trillion. Together these buyers finance the gap between federal tax revenue and federal spending, and their willingness to keep buying rests on the full faith and credit of the United States.
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 bonds, notes, and other direct obligations of the United States in the open market, under the direction of the Federal Open Market Committee. As of February 2026, the Fed held approximately $4.2 trillion in Treasury securities across bills, notes, bonds, inflation-protected securities, and floating rate notes in its System Open Market Account.1Federal Reserve Bank of New York. System Open Market Account Holdings of Domestic Securities
The Fed does not buy Treasuries as an investor chasing yield. Purchases and sales are its primary tool for influencing short-term interest rates and the broader money supply. Large-scale buying, sometimes called quantitative easing, adds reserves to the banking system and pushes rates down. Letting securities mature without replacing them, often called quantitative tightening, drains reserves and can push short-term rates upward.2Board of Governors of the Federal Reserve System. The Central Bank Balance-Sheet Trilemma
Foreign Governments and International Investors
Foreign buyers collectively represent the largest category of Treasury holders outside the federal government itself. As of December 2025, total foreign holdings reached approximately $9.27 trillion, roughly 32 percent of all publicly held Treasury debt.3U.S. Department of the Treasury. Major Foreign Holders of Treasury Securities Foreign central banks and sovereign wealth funds buy Treasuries to manage foreign exchange reserves, parking trade surpluses in dollar assets that are highly liquid and considered virtually risk-free.
Japan is the largest foreign holder at roughly $1.19 trillion, followed by the United Kingdom at about $866 billion and China at approximately $684 billion. Canada and Belgium round out the top five.3U.S. Department of the Treasury. Major Foreign Holders of Treasury Securities China’s holdings have declined significantly over the past decade, while the United Kingdom’s position has grown. These nations typically buy through primary dealers or directly at auction, and their participation reinforces the dollar’s role as the world’s dominant reserve currency.
Banks, Mutual Funds, and Other Institutional Investors
Domestic financial institutions are among the most active Treasury buyers. Mutual funds alone held roughly $4.4 trillion in Treasury securities as of early 2025, a total comparable in scale to the Federal Reserve’s book. Money market funds, which invest heavily in short-term Treasury bills, give everyday investors a way to earn a return on cash while keeping daily access to it. Pension funds and insurance companies favor longer-dated notes and bonds because the predictable semiannual interest lines up with their long-term obligations to retirees and policyholders.
Commercial banks hold Treasuries partly because federal regulators require it. 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 carry a zero-percent risk weight under international banking standards. Banks can count them dollar for dollar toward the requirement with no haircut, which makes Treasuries the most efficient way to satisfy the rule.
State and Local Governments
State and local governments invest in a specialized class of Treasury securities called the State and Local Government Series, or SLGS. These non-marketable securities exist specifically 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 involves arbitrage restrictions in the federal tax code. When a city or county issues tax-exempt bonds at a low interest rate, it cannot reinvest those borrowed proceeds at a higher rate and pocket the difference. Federal law treats bonds whose proceeds are used to acquire higher-yielding investments as arbitrage bonds, which can lose their tax-exempt status.6Office of the Law Revision Counsel. 26 USC 148 – Arbitrage SLGS securities give municipalities a controlled-yield place to park bond proceeds while they wait to spend on infrastructure or other public projects.
Individual Investors and Households
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 is just $100, with additional amounts in $100 increments.8TreasuryDirect. FAQs About Treasury Marketable Securities Buying through TreasuryDirect avoids brokerage commissions, though many investors prefer buying through a broker so their Treasuries sit alongside their other investments in one account.
At auction, individuals using TreasuryDirect submit non-competitive bids, meaning they accept whatever rate the auction sets. Non-competitive bids are capped at $10 million per auction. Competitive bidding, where the buyer specifies a desired yield, is only available through a bank, broker, or dealer.9TreasuryDirect. How Auctions Work
Savings Bonds
Series I Savings Bonds are a popular choice for individual buyers because their interest rate adjusts with inflation. As of early 2026, new I bonds pay a composite rate of 4.03 percent, made up of a fixed rate of 0.90 percent 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 These Buyers Are Actually Buying
The federal government issues several distinct types of securities, and the mix a buyer chooses tells you a lot about why they are buying.
- Treasury bills are short-term securities that mature in 4 to 52 weeks. They are sold at a discount to face value and pay no periodic interest; the return is the difference between the purchase price and the $100 face value at maturity. Money market funds and cash-management operations concentrate here.
- Treasury notes are medium-term securities with maturities of 2, 3, 5, 7, or 10 years, paying interest every six months at a fixed rate.
- Treasury bonds are long-term securities maturing in 20 or 30 years, also paying semiannual interest at a fixed rate. Pension funds and life insurers, matching long-dated liabilities, are natural holders.
- Treasury Inflation-Protected Securities come in 5-, 10-, and 30-year terms. TIPS adjust their principal value based on changes in the Consumer Price Index, so the fixed rate applies to an inflation-adjusted principal and the actual dollar payments rise with inflation.
- Floating Rate Notes are two-year securities whose interest rate resets weekly, tied to the most recent 13-week Treasury bill auction rate plus a fixed spread set at the original auction.13TreasuryDirect. Floating Rate Notes (FRNs)
- Savings bonds (Series I and EE) are non-marketable bonds bought through TreasuryDirect. They cannot be traded on secondary markets and are designed for long-term individual savings, with the annual limits and early-redemption penalties noted above.
SLGS securities sit outside this list because they are sold only to state and local government issuers, not to the public. Note that the very largest holders, the Fed and foreign central banks, buy across the whole marketable curve, which is part of why Treasuries of every maturity trade in such deep and liquid markets.