September ISM manufacturing gauge registers 54.5, trails 55.0 consensus
The ISM Manufacturing PMI for September came in at 54.5, below the 55.0 consensus estimate but near the prior month's 54.6.
Trump suggests inflation could reduce the national debt, while Cayman Islands hedge funds emerge as major Treasury buyers.
President Donald Trump has suggested that inflation might assist the United States in handling its $40 trillion national debt. Perhaps even more surprising is who is providing the financing.
During a TIME interview released on Thursday, Trump argued that stronger economic growth would ease the debt burden. He then added:
“Certain levels of inflation will also pay off that debt very rapidly. Very rapidly.”
Trump also claimed that elevated interest rates were causing greater harm to the nation than inflation.
The inflation argument does have some economic basis. Inflation reduces the real value of outstanding fixed-rate debt since the government repays it using dollars with diminished purchasing power.
However, there is a caveat. Rising inflation may drive up Treasury yields, which raises the cost of new borrowing and refinancing.
According to the Congressional Budget Office, elevated inflation and interest rates could substantially boost federal interest expenses.
Foreign nations support US debt financing by purchasing US Treasury securities, essentially loans to the government. The US receives the cash upfront and pledges to repay those investors with interest later.
So who is the top purchaser? Japan. According to the most recent data, it holds $1.1 trillion in US securities.
The Cayman Islands, a small British Overseas Territory, officially occupies fifth place with $460.1 billion.
But a Federal Reserve study revealed that Cayman hedge funds possessed roughly $1.85 trillion by the end of 2024. Bonds used as collateral for loans frequently disappear from the official count.
🚨 Cayman Islands, the unofficial largest holder of US Treasuries is buying US debt at the fastest pace in history.
— Bull Theory (@BullTheoryio) October 1, 2026
Officially, Cayman only ranks 5th among foreign holders, with $460 billion.
But Fed and SEC data show the real number is closer to $1.9 trillion once you count… pic.twitter.com/hsgBThJPgu
Purchasing is accelerating. Cayman's holdings of Treasury bills, short-term government debt, increased by 22% in a single month, reaching a record $211.2 billion in July, according to FRED data.
Certain traders on X allege that China is covertly repurchasing through the Cayman Islands. The Fed study does not identify any Chinese purchasers.
The United States' largest apparent foreign buyer of Treasuries might be a Caribbean financial hub serving as the legal domicile for leveraged hedge funds.
And these funds are acquiring the same debt that Trump claims inflation could help reduce.
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The ISM Manufacturing PMI for September came in at 54.5, below the 55.0 consensus estimate but near the prior month's 54.6.
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