US Dominates Global Fixed Income Market

Sifma - Fixed IncomeThe US fixed income market dwarfs that of rest of the world. SIFMA, the Securities Industry and Financial Markets Association, put out a report on fixed income in US and found the US has almost 40% of all global fixed income, and it is 1.9 times bigger than its next biggest competitor.


“The U.S. fixed income markets are the largest in the world, comprising 39.4% of the $103 trillion securities outstanding across the globe, or $41 trillion (as of 3Q19). This is 1.9x the next largest market, the EU. U.S. market share has averaged 39.4% over the last 10 years, troughing at 37.4% in 2011 and peaking at 41.8% in 2015,” the report found.

After the EU, China and Japan, came in third and fourth with 13% and 12% of the global fixed income respectively.

Us Treasury bonds made up the biggest single fixed income product in the US, with $16,673,000,000, outstanding as of the fourth quarter of 2019.

Mortgage backed securities, with $10.334,000,000 outstanding was the second biggest fixed income product in the US, the report found.

Corporate and municipal bonds came in third and fourth with $9,598,000,000 and $3,854,000,000 respectively, according to the report.

Fixed income is another way of describing debt securities.

US Treasury bonds are how the US finances its debt which now stands at over $20 trillion.

Corporate bonds are how corporations finance their debt, while municipal bonds are how localities finance their debt.

The report noted of US Treasury bond, “UST are debt obligations of the federal government used to fund its operations. Since UST are backed by the full faith and credit of the U.S. government, these securities are considered by market participants as the benchmark credit. The U.S. government has a AAA rating, meaning it has essentially no credit risk and can easily meet its financial obligations on time and in full. In light of this, UST show a diversity of holders, in both institutional type and foreign holders.”

The Chinese government is a significant holder of US Treasury bonds, holding more than $1 trillion as of the end of 2019.

Here is part of a story from China Daily.

“China reduced its holdings of US Treasuries to $1.1035 trillion in August, the second consecutive month in which the holdings dropped, according to data released Wednesday by the US Treasury Department.

“China, currently the second largest foreign holder of US Treasuries, cut its holdings by $6.8 billion in August, following a slight drop of $2.2 billion in July.”

The total US Treasuries held outside of the US was more than $6 trillion, according to a story in Bloomberg.

“The pile of U.S. Treasuries held outside the country grew in 2019 to nearly $6.7 trillion from $6.3 trillion at the end of the previous year, as the government’s borrowing picked up to fresh record levels.

“Total foreign ownership of U.S. government notes, bills and bonds rose for the third consecutive year, despite a second straight annual decline in China’s holdings, according to a Treasury Department report released Tuesday. The 2019 increase included a $44 billion decline in December after a $39.3 billion decline a month earlier.

US Treasury bonds are considered very liquid however they are traded over the counter between counterparties and not on a formal exchange.

Most bonds, or debt securities are traded over the counter.

SIFMA is “the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services,” according to its website.