Bonds are loans you can resell. Here is how the US Treasury sells $31.8 trillion of them, who owns them, how a real 2026 auction worked, and the arithmetic behind “prices fall when rates rise”.
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A bond is a loan split into tradable pieces: the issuer receives cash now and promises fixed interest (the coupon) and the principal back at maturity. The bond market has two parts. In the primary market, issuers sell new bonds; the US Treasury does it by auction, companies through underwriting banks. In the secondary market, investors trade existing bonds, mostly through dealers, and the price moves until the yield matches what similar new loans would pay.
The US Treasury market is the anchor because it is the largest and the one other borrowers price against. Total federal debt was $40.44 trillion on October 22, 2026, of which $32.60 trillion was held by the public (Treasury, Debt to the Penny); the rest is owed to government trust funds and is not traded.
Scope. US Treasuries as of October 2026, with corporate bonds mentioned where the mechanics differ. Municipal bonds, foreign government bonds and bond funds are not covered here; bond funds versus individual bonds are compared in bond ladder vs bond fund. Education, not advice.
Notes are half the market. The split matters because short bills reprice to the Fed’s rate within weeks, while notes and bonds lock in a rate for years.
| Type (Sept 30, 2026) | Maturity | Outstanding | Share |
|---|---|---|---|
| Bills | 4 weeks to 52 weeks | $7.12T | 22.4% |
| Notes | 2 to 10 years | $16.28T | 51.1% |
| Bonds | 20 and 30 years | $5.55T | 17.4% |
| TIPS (inflation-protected) | 5 to 30 years | $2.17T | 6.8% |
| Floating rate notes | 2 years | $0.71T | 2.2% |
| Total marketable (incl. $3.6B other) | $31.83T | 100% |
Source: Treasury, Monthly Statement of the Public Debt, table 1; shares are our arithmetic. Corporate bonds work the same way with one more risk, default, which is why they pay a spread over Treasuries (see credit spread).
Treasury announces the amount, then takes bids until a cut-off. Noncompetitive bidders, up to $10 million each (individuals can bid through TreasuryDirect), get the full amount at whatever yield the auction sets. Competitive bidders name a yield; Treasury fills them from the lowest yield upward until the offering is sold, and one bidder can win at most 35% of the offering (TreasuryDirect). Everyone accepted gets the same yield, the highest one needed to sell the whole amount.
A real example: the 10-year note auctioned on August 12, 2026. Treasury offered $42.0 billion. Bids from the public totaled about $106.3 billion, a bid-to-cover ratio of 2.53 ($106.3B ÷ $42.0B). The highest accepted yield was 4.683%, the coupon was set just below it at 4.625%, so the note sold at 99.540696 per 100 of face value. The Fed rolled $10.6 billion of maturing holdings into the auction on top of the $42 billion (Treasury auction data).
Who takes an auction is watched closely: a weak auction leaves more with the primary dealers, who must bid and then finance what they win in the repo market.
Foreign investors hold about 29% and the Fed about 14% of marketable Treasuries; the rest, roughly $18 trillion, sits with US money market funds, banks, mutual funds and ETFs, pensions, insurers, state and local governments and households. The domestic figure is our subtraction from three releases with different dates, so treat it as approximate.
| Holder | Treasuries held | As of |
|---|---|---|
| All foreign holders | $9.33T | Aug 2026 |
| of which foreign official (central banks, governments) | $3.76T | Aug 2026 |
| Japan | $1.07T | Aug 2026 |
| United Kingdom | $1.01T | Aug 2026 |
| China, Mainland | $0.59T | Aug 2026 |
| Federal Reserve | $4.57T | Oct 21, 2026 |
Sources: Treasury International Capital, major foreign holders; Fed holdings from H.4.1 via FRED (TREAST). Country figures show where securities are held in custody, so holdings in London or Belgium can belong to investors elsewhere.
Because the coupon is fixed. If new 10-year notes pay more than yours, a buyer will only take yours at a lower price, low enough that coupons plus the gain to par at maturity match the new yield. The price is the present value of the remaining payments: each semiannual coupon C and the final 100 are divided by (1 + y/2)^t, where y is the yield and t the number of half-years until that payment.
Worked example. $10,000 face of a 10-year note with a 4.625% coupon pays $231.25 every six months and $10,000 at the end. Discounted at 4.625% it is worth exactly par, $10,000. At 5.625% each payment is discounted at 2.8125% per half-year and the note is worth $9,243, a 7.6% loss; at 3.625% it is worth $10,833. As a check, the same formula at the August 12, 2026 auction yield of 4.683% gives 99.541, the price Treasury published.
| Bond with a 4.625% coupon, $10,000 face | Yield falls 1 pt | Unchanged | Yield rises 1 pt |
|---|---|---|---|
| 2-year | $10,191 (+1.9%) | $10,000 | $9,813 (−1.9%) |
| 10-year | $10,833 (+8.3%) | $10,000 | $9,243 (−7.6%) |
| 30-year | $11,820 (+18.2%) | $10,000 | $8,559 (−14.4%) |
The longer the bond, the bigger the swing, which is what duration measures. Holding a single bond to maturity still returns the promised payments; the loss shows up if you sell early, or in a bond fund that keeps selling and replacing bonds.
The yield curve plots Treasury yields by maturity, and in October 2026 it slopes upward after years of inversion. Short yields sit near the Fed’s range of 3.75%–4.00% (raised on September 16, 2026, held on October 28); longer yields are higher because investors ask more for inflation risk and for tying money up. The 10-year minus 2-year spread was +0.31 point on October 23, 2026, against −1.07 on March 8, 2023, the deepest recent inversion (FRED).
| Maturity | Oct 22, 2025 | Oct 22, 2026 | Change |
|---|---|---|---|
| 3-month | 3.96% | 4.22% | +0.26 |
| 2-year | 3.45% | 4.65% | +1.20 |
| 10-year | 3.97% | 4.96% | +0.99 |
| 30-year | 4.54% | 5.29% | +0.75 |
Daily constant-maturity yields: US Treasury via FRED. Whether an inverted or re-steepening curve says anything about recessions is contested and covered in recession indicators; the glossary entry on the yield curve explains the shapes.
Treasury yields are the starting rate for almost everything else. A 30-year mortgage is priced off the 10-year yield plus a spread, which is why mortgages can rise after a Fed cut (see how the Fed sets interest rates). Stock valuations discount future profits at a rate built on Treasury yields, so a sharp rise in yields can lower what investors pay for the same earnings, especially for companies whose profits lie far in the future.
When “bonds are the safe part” is wrong. In 2022 the S&P 500 returned −18.04% and the 10-year Treasury −17.83% (NYU Stern annual returns), so the usual cushion failed when inflation drove yields up. In March 2020 the 10-year yield rose from 0.54% on March 9 to 1.18% on March 18 while stocks were falling, as investors sold even Treasuries for cash. Treasuries carry almost no default risk, but they do carry rate and inflation risk; the protective role is discussed in bonds as a hedge.
Limitations. Holder data come from different releases and dates; country custody data are not ownership. The price table assumes an instant one-point move and ignores the passage of time. Auction results are one example, not a typical auction. The full map of how bonds connect to the Fed, banks and repo is in how the financial system works.
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Marketable Treasuries totaled $31.83 trillion on September 30, 2026: $16.28 trillion of notes, $7.12 trillion of bills, $5.55 trillion of bonds, $2.17 trillion of TIPS and $0.71 trillion of floating rate notes.
Among foreign holders, Japan held $1.07 trillion and the UK $1.01 trillion in August 2026, with mainland China at $0.59 trillion. All foreign holders had $9.33 trillion; the Fed held $4.57 trillion on October 21, 2026.
Yes. Individuals can place noncompetitive bids of up to $10 million through TreasuryDirect or a bank or broker, and receive the yield set by the auction. Competitive bids go through a bank or broker.
It is the amount bid divided by the amount sold. In the August 12, 2026 10-year auction, about $106.3 billion of public bids for $42.0 billion gave a ratio of 2.53.
The coupon is fixed, so when new bonds pay more an old bond must sell for less to offer the same yield. A 10-year 4.625% note bought at par is worth about 7.6% less if its yield rises by one point.
Longer loans pay more than short ones, which is the normal shape. On October 22, 2026, 2-year Treasuries yielded 4.65% and 10-year Treasuries 4.96%.
A yield rise reduces the bond’s market value even if you hold it. Holding to maturity preserves the promised nominal payments if the issuer pays, but does not remove inflation or opportunity-cost risk.
Globally they are about the same size: SIFMA counted $160.7 trillion of bonds outstanding and $157.8 trillion of stock market value at the end of 2025. In the US, stocks were larger: $68.9 trillion against $61.2 trillion of bonds.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.