China has aggressively trimmed its holdings of U.S. sovereign debt to levels not seen since the global financial crisis, exacerbating a historic fixed-income selloff that has pushed the 10-year Treasury yield toward the critical 5% threshold.
The Great Treasury Exodus
Capital flight is hitting the U.S. bond market as major global central banks rapidly unwind their dollar-denominated debt. According to data from Macromicro.me, foreign holdings of U.S. Treasuries fell by $139 billion in March—marking the “largest monthly decline since September 2022.”
The world's largest economic superpowers heavily drove the liquidation. Japan, the top foreign holder, reduced its stockpile by $48 billion to fund yen interventions. However, the most profound structural shift came from Beijing.
China, the third-largest foreign holder, “trimmed its holdings by $41 billion, to $652 billion,” registering their “lowest level since September 2008.” This latest divestment means China’s total U.S. debt portfolio has plummeted by $109 billion, or 14%, since the start of 2025 alone.
Yields Re-Price Amid Supply Shock
This coordinated foreign dumping has triggered an acute supply shock, sending bond prices crashing while yields climb. The 30-year Treasury yield recently touched 5.09%, while the benchmark 10-year Treasury yield is holding firm at 4.57% after flirting with multi-year highs.
With international demand evaporating, the Kobeissi Letter warns that “US Treasury markets are becoming even more volatile.” The withdrawal of structural foreign buyers leaves the market highly dependent on domestic private capital to absorb expanding U.S. fiscal deficits.
Geopolitical Tug-of-War
While Asian superpowers aggressively distance themselves from U.S. debt, a stark geographic divergence is emerging. In sharp contrast to Beijing’s flight, the United Kingdom bucked the global trend.
The UK, currently the second-largest foreign holder of US debt, “added +$30 billion, with total holdings rising to a record $927 billion.” Nonetheless, the British inflows were not nearly enough to offset the massive broader liquidations across Asia.
How Have Markets Performed In 2026?
The S&P 500 index has advanced 8.56% year-to-date. Similarly, the Nasdaq Composite index was up 13.16%, and the Dow Jones gained 3.93% YTD.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100, respectively, were higher in premarket on Friday. The SPY was up 0.43% at $745.91, while the QQQ was higher by 0.64% to $719.11.
Meanwhile, Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), rose 0.38% in premarket on Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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