For national governments, the word “default” typically means the failure of a nation to service its debts in full and on time. If the US Treasury fails to make its full payments of interest or principal to bond holders, it has defaulted. That would be a sharp setback for investor confidence.
US Treasury debt is held by legions of investors around the world, from ordinary American families to large banks and hedge funds. Nearly half of the debt issued to investors is held abroad, with China and Japan leading the pack by far. Those two countries each hold more than $1 trillion in Treasury debt.
