The issue of financing the US public debt by foreign investors is becoming increasingly politicized and burdensome for the budget.

The problem of financing the US public debt by foreign investors is becoming increasingly politicized and burdensome for the budget. According to the US Treasury Department, as of February 1, 2026, the total volume of foreign investments in US Treasury securities reached $9,305.8 billion, compared to $8,617.8 billion in January 2025.

This accounts for a quarter of the total US public debt, which stands at $38.77 trillion as of early February 2026. Over the entire 2025, the volume of net purchases of Treasury securities by foreign market participants amounted to $688 billion. The main inflow of investments into US debt obligations came from Group of 7 countries— the UK, Japan, Canada, and France, as well as Belgium and Norway, which together accounted for more than 65% of all new investments. At the same time, major BRICS countries—China, India, and Brazil—became large net sellers of US Treasury securities, offloading American bonds worth a total of $132 billion.

China is most consistently pursuing a policy of reducing its portfolio of dollar assets, motivated by the unpredictability of US policy and a national strategy of investment diversification. Financial regulators, in the form of the People's Bank of China and the National Financial Regulatory Administration, recommend that Chinese banks sell accumulated US Treasury obligations and refrain from purchasing new ones. Over the period from 2012 to January 2026, China, as one of the largest holders of US Treasury obligations, halved its investments in these securities—from $1.3 trillion to $694 billion. Alternatives to investments in US public debt are becoming investments in gold and infrastructure projects in BRICS+ member countries.

The aggravation of the US public debt problem is also linked to events in the Middle East. The surge in oil prices has increased inflation risks and, accordingly, raised the cost of debt servicing. Given the high sensitivity of US fixed-income bonds to rising consumer prices, their active sell-off by holders has been observed throughout March this year. As a result, the yield on 10-year obligations rose in mid-March from 4% to 4.42%, and on 20-year obligations—from 4.6% to 5.02%.

Jerome Powell, Chairman of the Federal Reserve, in his speech following the March 17-18 meeting of the Federal Open Market Committee (FOMC), noted the direct impact of geopolitical instability on the heightened risks of inflation "stuck" at a level significantly exceeding the 2% target, and as a result—on the significant increase in the cost of servicing US public debt. At the end of the FOMC meeting, a decision was made to keep the target range for the federal funds rate at 3.50-3.75% per annum. Thus, the elevated level of Treasury bond yields is maintained, accompanied by an increase in borrowing costs, growth in public debt, and consequently further increase in the budget deficit.

According to the forecast of the US Congressional Budget Office, by the end of fiscal year 2026, the overall federal budget deficit will increase by 4.39% to reach $1.883 trillion, compared to a deficit of $1.775 trillion in fiscal year 2025. In the perspective until 2036, the budget deficit, per the Office's forecast, will grow to 6.7% of GDP and reach $3.1 trillion.

Author: Professor, Doctor of Economic Sciences, Professor of the Department of World Economy and World Finance at the Financial University under the Government of the Russian Federation Viktor Yakovlevich Pishchik