While China remains the world’s fastest-growing buyer of U.S. Treasuries and other foreign bonds, the U.S. is becoming — speaking in relative terms — less dependent on Chinese financing. Foreign demand, according to Brad Setser of the Council on Foreign Relations, accounts for roughly half of all treasury purchases. The other half comes from U.S. private households.
From CFR: Who bought all the Treasuries the US government has issued in the last four quarters of data (q2 2008 to q1 2009)? Foreign demand for Treasuries — as we have discussed extensively — hasn’t disappeared, unlike foreign demand for other kinds of US debt. But foreign demand hasn’t increased at the same pace as the Treasury’s need to place debt. The gap was filled largely by a rise in demand for Treasuries from US households.
Before the crisis, foreign purchases formerly accounted for almost all new Treasury issuance. Over the last 12 months, foreign demand accounted for more like half of total issuance even as foreigners bought a record sum of Treasuries. And from what we know about the second quarter, I don’t think the basic story has changed.