Bond Analysts Debate If China Had Role in Treasuries Swings (2025)

Bond Analysts Debate If China Had Role in Treasuries Swings

Ruth Carson and Masaki Kondo

Fri, Apr 11, 2025, 3:31 AM 5 min read

(Bloomberg) -- After a week of wild swings in the US bond market, China’s holdings of Treasuries are increasingly under scrutiny from analysts around the world.

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Some have gone as far as suggesting — without hard evidence — that sales by Beijing may have helped fuel the biggest surge in 30-year yields since the pandemic and subsequent volatility. Others debate whether China might turn to dumping US debt in the future as a response to the steepest American tariffs in a century.

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“China may be selling Treasuries in retaliation,” wrote Ataru Okumura, a senior interest-rate strategist at SMBC Nikko Securities in Tokyo, in a note to clients. Should this be the case, China has an incentive to show “it won’t hesitate to cause turmoil in the global financial market in order to improve its negotiating power against the US.”

President Donald Trump extended his global trade war this week, imposing significant tariffs on global imports, including a 145% tax on all products from China. The move roiled markets worldwide and triggered a pullback from US Treasuries that sent longer-term yields jumping by the most since 2020.

Analysts have cited a variety of fundamental and technical factors for the move, from hedge fund selling to fears of stagflation. The possibility of China’s government playing a role is on the more speculative end of the spectrum, given its trading activity is a closely guarded secret.

But strategists often point to the country’s Treasuries stockpile as a potential point of leverage over the US — even if aggressive sales could come at a steep cost for China by driving down the value of its foreign reserves.

Still, a team at Goldman Sachs Group Inc. speculated that selling dollar-based assets could be a retaliatory option for China, while Ed Yardeni, founder of Yardeni Research, said bond investors may start fretting that Beijing and other global holders could begin offloading Treasuries. Citigroup Inc. economists Xiangrong Yu and Xinyu Ji wrote that they had received numerous client inquiries on whether China would sell its holdings.

Treasuries Suddenly Trade Like Risky Assets in Warning to Trump

China is the second-largest foreign owner of US Treasury bonds, after Japan, and has been selling down for some time, at least according to official data.