Markets did a number on everyone Monday. A real mess. Tariffs went up, China frowned, and suddenly everything was wobbling. Bitcoin, predictably, bounced around like a pinball – a ten percent swing isn’t unusual, sadly. But the real story isn’t the crypto chaos; it’s what’s happening with the U.S. 10-year Treasury yield. The Trump administration wants that yield down, needs it down, actually, to refinance a mountain of debt. Trillions, to be exact.
- The U.S. 10-year Treasury yield is crucial for the Trump administration’s debt refinancing plans, and recent market events have caused unexpected fluctuations.
- While some speculate China is selling off U.S. debt, others argue that a stronger dollar indicates money flowing into the U.S. due to domestic inflation concerns.
- China’s reduction in Treasury investments is a long-term trend, tied to its economic situation, making a sudden, punitive sale unlikely and potentially self-damaging.
The yield *had* been cooperating, dropping from 4.8% to 3.9% after the tariff announcements. More demand for those Treasury notes, see? Simple enough. Except, then it didn’t stay down. It jumped. To 4.22%. Which is…odd. Usually, when things look scary, people flock to safety – U.S. Treasuries. Not this time. And it wasn’t just us. The U.K. had its own mini-crisis, reminiscent of the Liz Truss debacle, and yields rose globally. Something felt off. Like a bad smell you can’t quite place.
Ole Hansen at Saxobank noticed. He pointed out the size of the sell-off in long-dated Treasuries. A big sell-off. Potentially a sign that big holders – maybe even China – were unloading their U.S. debt and taking their money elsewhere. The 30-year yield jumped from around 4.30% to 4.65%, and the 10-year followed suit. But is that the whole story?
US Treasuries suffered a massive sell-off yesterday, with long yields rising the most since the turbulence during the pandemic outbreak—a possible sign of large holders of Treasuries, such as foreign holders, selling and repatriating their assets. 🧵https://twitter.com/Ole_S_Hansen/status/1909487238800454093
Jim Bianco isn’t buying the China story. He says look at the dollar. It *rallied*. If China (or anyone else) was dumping Treasuries, they’d need to convert those dollars to something else, weakening the dollar. But it got stronger. Which suggests, Bianco argues, that money was flowing *into* the U.S., not out. More domestic concerns about inflation, maybe. It’s a puzzle.
China’s Role: More Complicated Than It Seems
The whispers about China selling off their holdings – around $761 billion as of January – continue, but the narrative feels…thin. It’s easy to assume China can weaponize its Treasury holdings, use them as leverage in the trade war. But that’s probably not how it works. As Michael Pettis points out, China’s Treasury holdings are tied to its current account surplus. It’s not a simple on/off switch.
And, frankly, China’s been reducing its Treasury investments since 2013, long before the latest trade tensions. They’ve been shifting away from long-term bonds anyway, preferring agency bonds, short-term bills, and just keeping cash in U.S. banks. It’s a slow drift, not a sudden, dramatic dumping. The idea of a swift, punitive sale feels more like wishful thinking than a realistic threat.
Think of it this way: China’s economic situation is complex. They have their own problems. Trying to hurt the U.S. economy with Treasury sales might end up hurting themselves more. It’s not a clean, simple equation. It’s messy. Like most things in international finance.
So, what does all this mean for Bitcoin? Not a lot, directly. Bitcoin reacted, sure, swinging ten percent. It always reacts to everything. But the underlying issue – the shifting dynamics of U.S. debt and global confidence – is a bigger story. A story about a country trying to manage a massive debt load in a world that’s increasingly skeptical of…well, everything. And that, frankly, is a story that will keep unfolding for a long time.