Friday, October 17, 2025

Cayman Islands And American Debt

 


Cayman Islands Entities Quietly Hold Trillions in U.S. Debt

Recent data from the U.S. Treasury and the Federal Reserve reveal that entities based in the Cayman Islands hold a surprisingly large share of U.S. government debt — far more than most Americans realize. According to the Treasury’s official “Major Foreign Holders of U.S. Treasury Securities” report, Cayman Islands accounts hold roughly $448 billion in Treasurys, placing the territory among the top foreign holders of U.S. debt. That figure alone is striking for a nation of just 70,000 people, reflecting its role as a global financial hub where hedge funds and investment vehicles register for regulatory and tax purposes.

However, the story does not end there. A Federal Reserve staff analysis suggests that Cayman-domiciled hedge funds may actually control as much as $1.85 trillion in U.S. Treasurys when accounting for leveraged “basis trades” — complex positions that borrow heavily to profit from small pricing gaps between Treasury securities and futures. These exposures often don’t appear in official Treasury International Capital (TIC) reports, meaning that Cayman-linked holdings could be more than four times higher than publicly reported. The findings highlight a major blind spot in how global Treasury ownership is tracked, especially in an era when non-bank financial institutions dominate debt markets.

This gap has renewed concerns among policymakers about the transparency and stability of offshore financial structures. The Cayman Islands, long known as a preferred domicile for hedge funds, acts less as a true “foreign” creditor and more as a pass-through jurisdiction for global capital — including U.S. investors themselves. Still, the scale of these Cayman-based Treasury holdings underscores how deeply interconnected global markets have become. Whether the true figure is $450 billion or closer to $2 trillion, the data confirm that the world’s most important bond market is increasingly influenced by trades that exist largely out of sight, in offshore balance sheets far from Washington’s direct view.

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Cayman Islands And American Debt

  Cayman Islands Entities Quietly Hold Trillions in U.S. Debt Recent data from the U.S. Treasury and the Federal Reserve reveal that entiti...