Quick scan of the latest Fed data on who really owns America’s debt and it’s a game-changer. Official numbers say Japan is the top foreign buyer of US bonds. Dig deeper with cross-border flows, and the Cayman Islands take the crown. That’s hedge fund central - home to nearly 70% of all hedge funds worldwide.
The numbers:
Cayman hedge funds now hold $1.839 trillion in US Treasuries.
Japan? $1.151 trillion.
UK + China combined? Less than that.
Since 2022, these funds have snapped up 37% of all new US bond issues - as much as every other foreign investor put together. Their holdings have more than doubled in just three years.
The catch? Most of this is borrowed money. The bonds are used as collateral for risky futures bets. One sharp move in rates or prices, triggered by Trump’s tariffs, China’s export curbs, or a surprise inflation spike, and these funds could be forced to sell fast. That’s panic selling territory.
Meanwhile:
US deficit this year: over 6% of GDP
Debt (excluding government-held): 100% of GDP, heading to 120% in 10 years
Interest payments last year: over $1 trillion - more than healthcare or defense
Markets are already jumpy - regional bank fraud news and the Tricolor collapse sent stocks reeling. IMF chief Kristalina Georgieva says the shift from banks to non-bank players like hedge funds keeps her up at night. Moody’s says no crisis yet... but things can change fast.
Germany’s betting on 1.3% growth in 2026. One big Treasury sell-off could blow that plan apart.
Bottom line: The world’s safest asset might be sitting in the riskiest hands.
