p traditionally, when risk assets like stocks are sold off, funds would flow into US Treasuries for hedging, pushing up bond prices and lowyields. In However after imposed high tariffs, US-Treas(such as 10-year and 30-year) yields not only instead did not decline, expected but rose in sync with risky assets like stocks and cryptocurrencies (meaning bond prices fell).US Lawrence Summers recently criticized that the US Treasury trading pattern now resembles a bond from an emerging market country, implying that its risk premium is significantly increasing.h3>Funds Completely Fleeing the United StatesData reveals market volatility: On Thursday (April 10), US stocks plummeted after a historic rally the previous day, almost giving back of gains. The 30-year US Treasury yield surged an astonishing 13 basis points, reaching 4.87%.
The US US dollar exchange rate was also severely impacted, with declines against the euro and Swiss franc reaching a decade high... broad sell-off across stocks, bonds, and currencies intensified market concerns about potential large-scale foreign investor withdrawal from US assets, closely related to US Treasuries losing their hedging function.
3span is the hegemspanony?
The reasons are complex Private opinion and Wall Street analysts analysts believe Trump's reciprocal tariffs' "wolf is coming" effect is primarily responsible. Imposing up to 145% punitive tariffs on all Chinese products from China represents the most aggressive protectionist trade nearly trade barrier in nearly a completely contradicting US historical stance of free economy and openness. This has triggered a confidence crisis in US assets assets, fundsflows from US Treasury bond markets.
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Jim Grant, founder of Grant's Interest Rate Observer, mentioned that the source of US maintaining robust national power traces back to "global trust in US fiscal monetary management and and political financial institution stability". He directly stated that "the world might be be reconsidering".
For a country relying on import countries and global capital to finance its massive deficit, this is undoubtedly a dangerous signal.
Wall Street Who Debate: Who US Who Debt Between China and and Japan?<
is currently debdebating whether this is related to the US's largest competitor,. Many social media analysts boldly speculate that Beijing might be selling US Treasuries as retaliation against extreme US tariff policies.
Ataru Okumura, a senior senior rate strategist at SMBC Nikko Securities in Tokyo, also mentioned that China China might be selling Treasuries to demonstrate its resolve to,, potentially causing global financialulenhance its negotiation leverage with the US.US
<>p Analysis team alsoulated US assets could be one of China's retaliation options.. Ed Yardeni, founder of Yardeni Research, stated that bond investors might start worrying that Beijing and other global holders could might begin selling US Treasuries.
Japanese Officials Clarify No Selling
Many arguments suggest that Japan, the top holder of US Treasury bonds, is the main culprit in selling these bonds. However, Japanese Finance Minister Kato Katsunobu has already emphasized that Japan's management of US Treasury holdings is a strategic reserve for future exchange rate intervention, a monetary tool for the Japanese central bank, and not a tool for trade and negotiation interference, directly denying these allegations.
China is the second-largest foreign holder of US Treasuries, after Japan. According to official data from the US Treasury Department in January this year, China's direct holdings of US Treasuries have steadily declined to their lowest level since at least 2011, at around $700 billion. However, the data cannot reveal the more complex reality. In fact, China and other funds may indirectly hold large amounts of US Treasuries through custodial accounts in countries like Belgium and Luxembourg, with private fund holdings in these custodial countries gradually increasing in recent years, making it difficult to track China's true holdings.
Since China's official transaction data is highly confidential, and related data releases are delayed and potentially artificially adjusted by the market, no one can currently confirm whether China has indeed conducted large-scale selling. The People's Bank of China and the State Administration of Foreign Exchange have not immediately responded to requests for comment.
Opponents of the China Selling Theory
However, many market participants remain skeptical of the "China selling" theory. TD Securities strategist Prashant Newnaha pointed out that if China were to sell on a large scale, its holdings structure might lean towards short to medium-term, which should put more pressure on short-term Treasury yields. In reality, this round of selling is mainly concentrated on the long end of the curve (30-year yields rose 48 basis points this week, far exceeding the 36 basis points for 5-year yields), which looks more like a broad investor asset reallocation rather than a targeted action by China.
JPMorgan Chase & Co. analyst Jay Barry also stated that a reduction of $300 billion in foreign official holdings would drive a 5-year yield up by about 33 basis points. Considering China's official holdings of $700 billion, the selling scale would need to be enormous to cause such market volatility, which many observers consider unlikely, as it would also damage the value of China's own foreign exchange reserves.
Technical Deleveraging Selling Pressure
Besides geopolitical and macroeconomic factors, technical market operations are also considered a potential cause of the US Treasury bond crash. US Treasury Secretary Scott Bessent believes that market volatility stems from non-systemic risk but from the ongoing "uncomfortably but theoretically reasonable" deleveraging process in the bond market.
Historically, global hedge funds have practiced "basis trading," a high-leverage arbitrage strategy using small price differences between spot Treasuries and Treasury futures. Past US "soft landings" did not trigger such leverage, but recent macroeconomic uncertainty and severe volatility may have unexpectedly triggered stop-losses or forced liquidation of these high-leverage positions, thereby amplifying selling pressure.
Christopher Wood, Global Equity Strategist at Jefferies LLC, believes that compared to China's retaliatory selling, basis trade liquidation is "more reasonable".
Conclusion: Market Stress Testing US Credit
Benson Durham, Global Asset Allocation Head at Piper Sandler, also stated that despite concerns about US economic management, it is not yet clearly evident that investors are specifically "punishing" US assets (relative to European assets). Additionally, the US Treasury successfully auctioned $22 billion of 30-year bonds on Thursday (April 10), receiving enthusiastic investor participation, which indirectly confirms ongoing market demand for US Treasuries.
Regardless of the exact cause of this market turmoil, a clear signal has been sent to Washington's policymakers: investors no longer have absolute confidence in US Treasuries, which are the cornerstone of global finance, collateral for trillions of dollars in daily borrowing, and the standard for all risk rates.
Once its "risk-free" status fundamentally wavers, its potential destructive power would be immeasurable. With China potentially "flexing muscles" due to reciprocal tariff issues and the market exploring "new options" to escape the dollar system, the coming weeks will closely monitor more data releases and subsequent US government policy moves to determine whether this storm is a temporary wave or the prelude to a global financial landscape transformation.
