The United States and Its Creditors: Assessing Foreign Demand for U.S. Assets

Anusha Chari and Gian Maria Milesi-Ferretti

No 21921, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyzes foreign demand for U.S. assets, with particular emphasis on U.S. Treasury securities. It documents compositional shifts in U.S. bilateral external positions across geographic regions and asset classes, providing estimates of creditor positions closer to a nationality-based concept. While rising U.S. equity prices explain a sizable share of the deterioration in the net external position, foreign purchases of U.S. Treasury securities have been the largest source of U.S. current account financing. The share of these securities held by foreign official investors has declined sharply during the past decade, while the share held by foreign private investors (especially through financial centers) has risen. The decline in foreign official holdings is well explained by lower reserve accumulation, increased Federal Reserve holdings, and dollar appreciation against other reserve currencies. The evidence is consistent with central banks rebalancing their portfolios to avoid large swings in currency shares. Geoeconomic fragmentation is negatively correlated with official demand for U.S. Treasuries, while foreign private demand remains sensitive to safe-haven dynamics. Overall, the paper assesses how these structural shifts affect portfolio preferences for U.S. assets and their potential implications for the U.S. external position amid heightened geopolitical and fiscal uncertainty.

Keywords: Net international investment position; Valuation effects; US Treasury securities; International capital flow; geoeconomic fragmentation (search for similar items in EconPapers)
JEL-codes: F21 F32 F34 G15 H60 H63 (search for similar items in EconPapers)
Date: 2026-09
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