U.S. Treasuries remain the cornerstone of safety in diversified portfolios.
Despite global uncertainties such as rising debt levels, geopolitical tensions, and a recent U.S. credit downgrade, Treasuries continue to offer unmatched liquidity, robust demand, and protection during market volatility.
Unmatched liquidity
The U.S. Treasury market is the most liquid market globally, with an average daily trading volume exceeding $910 billion.
This depth ensures investors can transact in large volumes with minimal price impact, even during periods of market volatility. For instance, during the pandemic market downturn in early 2020, daily Treasury trading volumes surged past $1 trillion.
By comparison, the SPDR S&P 500 ETF (SPY)—the world’s most actively traded individual security—averaged about $50 billion in daily trading volume in April 2025, a small fraction of the Treasury market’s activity.
A global benchmark for safety
U.S. Treasuries are widely regarded as a global risk-free benchmark, setting the standard against which virtually all other investments are measured. With $28.8 trillion outstanding, the U.S. Treasury market is by far the largest bond market in the world. Because of their risk-free status, U.S. Treasuries are deeply embedded in the global financial system—used as a base rate for other types of loans, discount rates in financial modeling, and benchmark rates for bond indices.
Despite recent headlines and political noise, demand for Treasuries remains strong. In April 2025, the Treasury auction—where the U.S. government issues new debt and investors bid for it—drew demand nearly three times the available supply. This was the strongest auction of the year. Notably, much of the issuance was absorbed by foreign central banks, confirming the global appeal of U.S. Treasuries.
Who owns Treasuries?
Ownership of U.S. Treasuries is broad and diverse. About 70% of existing outstanding Treasury debt is held domestically—by the Federal Reserve, mutual funds, pension plans, banks, insurers, and individual investors. The remaining 30% is held by foreign investors, primarily central banks and sovereign wealth funds.
Top foreign holders include Japan ($1.1 trillion), China ($784 billion), the U.K. ($750 billion), Luxembourg ($412 billion), and Canada ($406 billion). While the share of foreign ownership has varied over time, it peaked near 60% of marketable debt in 2008 and has since declined.
This widespread ownership across institutions and borders reinforces the global market’s assessment of U.S. Treasuries’ strength.
Protection when you need it most
Treasuries aren’t just liquid and well-owned—they have also provided meaningful protection when markets have turned volatile.
In the graphic below, we examined the worst 10% of monthly returns for U.S. stocks between 1988 and 2024. While stocks sold off, Treasuries provided much-needed protection to portfolios. Meanwhile, riskier assets—such as dividend-paying stocks, commodities, hedge funds, and even high yield bonds—simultaneously lost value.
Beyond U.S. Treasuries
While data supports continued confidence in U.S. Treasuries, Vista’s bond approach includes diversification into other high-quality government bonds. We maintain exposure to government-issued bonds from countries with AA credit ratings or higher, such as the U.K., Germany, France, Canada, and Singapore. These bonds have provided additional portfolio diversification, without sacrificing the overall level of safety we seek.
The bottom line on Treasury bonds
We expect Treasury bonds continue to play a vital role for investors. They have provided ballast during market selloffs, offered liquidity when needed most, and remain the risk-free asset in the global financial system. And while concerns about U.S. deficits and debt levels are valid and may influence future fiscal policy, the Treasury market’s functionality and global demand remain robust.
For Vista clients who maintain an allocation to bonds, exposure to U.S. Treasury bonds alongside other high-quality government bonds remains an essential source of portfolio stability across various market environments.
