Monday marked one of the most turbulent trading sessions since the COVID-era crash of March 2020, exposing fresh fault lines in the global financial system as rising geopolitical tensions and erratic bond market behavior rattled investors worldwide.
At the heart of the chaos was the U.S. 10-year Treasury yield—a key benchmark for global finance and the so-called “risk-free” rate. Following President Donald Trump’s latest tariff offensive against China, markets swung violently, with risk aversion spreading across asset classes. Bitcoin (BTC), for instance, saw intraday moves of up to 10%. But it was the bond market that drew the most scrutiny.
Yields initially dropped from 4.8% to 3.9% late last week as investors fled to safety. But in a jarring reversal, the 10-year yield surged back up to 4.22% on Monday—an unexpected move during a flight to safety. Bond prices and yields typically move in opposite directions, so rising yields amid heightened risk suggested something deeper was at play.
The ripple effect was global. In the U.K., yields posted their sharpest spike since the October 2022 pension fund crisis under then-Prime Minister Liz Truss. Across the board, sovereign debt markets signaled waning confidence in fiat currencies and long-dated government securities.
Ole S. Hansen, head of commodity strategy at Saxo Bank, called the sudden rise in long-term U.S. yields a possible sign of foreign capital exiting the market. “U.S. Treasuries saw a significant sell-off,” Hansen posted on X, “with the 30-year yield jumping from around 4.30% to 4.65%, while the 10-year climbed from 3.85% to 4.17%. This could reflect large holders, potentially foreign entities, offloading U.S. debt and repatriating funds.”
Reports speculated that China had offloaded $50 billion in Treasuries, fueling further concerns. However, not everyone agrees with that theory.
Jim Bianco, president of Bianco Research, pushed back on the foreign-selling narrative. “No, foreigners aren’t selling Treasuries to punish Trump,” Bianco argued, noting that the U.S. Dollar Index (DXY) rallied 2.2% in just three days. “If China were dumping Treasuries, they’d convert dollars to other currencies, weakening the dollar. But the dollar strengthened—suggesting capital is flowing into the U.S., not out.”
Instead, Bianco pointed to domestic concerns—particularly inflation—as the likely driver behind the sell-off in longer-dated bonds.
China’s role remains murky. Though rumors persist, there’s no confirmation that the country has significantly shifted its strategy. As of January 2025, China held $761 billion in U.S. government debt, second only to Japan. While many view China’s Treasury holdings as potential leverage in trade disputes, experts like Michael Pettis, author of The Great Rebalancing, argue otherwise.
According to Pettis, China’s Treasury investments are a direct result of its current account surplus—not a strategic weapon. “Beijing can’t simply offload Treasuries without also disrupting its own macroeconomic balance,” he’s long maintained. In fact, China has been gradually trimming its U.S. bond exposure since 2013, following a peak in its current account surplus after the 2008 financial crisis.
Monday’s bond market turbulence, then, appears to reflect a complex mix of geopolitical stress, domestic inflation fears, and structural imbalances—rather than a coordinated move by foreign powers.
