Analyzing Federal Debt held by Foreigners

As U.S. treasury yields (TBT, TLT) are starting to spike upwards, investors should pay more attention to this new trend. To help investors monitor U.S. treasury yields I'll point out another interesting correlation between U.S. debt held by foreigners and U.S. bond yields. We will see they are inversely correlated. If foreigners sell U.S. bonds, bond yields will go up.

The total public debt consists of two components:

1) Debt held by the public which is $US 11.177 trillion today.
2) Intragovernmental debt which is $US 4.783 trillion today.

The sum of these two is almost $US 16 trillion. The debt held by the public is increasing very rapidly, while the intragovernmental debt is stable.
Of these two components, the first one can be held by foreigners.

To see the foreign holdings you can go to this site: Treasury.gov.

Table 1: Foreign holdings of U.S. treasuries

Avondale Asset Management has recently updated the percentage debt that foreigners held on in April 2012. They put up chart 1: Percentage of Publicly Traded Federal Debt Held by Foreigners.

Chart 1: Percentage of Publicly Traded Federal Debt Held by Foreigners

To read the full analysis, go here.