Monday’s sharp moves in global bond markets may have seemed technical, but the underlying message was geopolitical. As the United States and China lock horns once again—this time over tariffs—the financial aftershocks are being felt across continents, with the U.S. Treasury market flashing unexpected signs of strain.
The 10-year U.S. Treasury yield, often considered a foundational benchmark for global finance, made an astonishing roundtrip: falling from 4.8% to 3.9% late last week before suddenly surging to 4.22% on Monday. Such volatility is rare in what is supposed to be the world’s most stable debt market.
The anomaly came just after President Trump reignited trade hostilities with sweeping tariffs on Chinese imports, pushing investors toward risk-off mode. Normally, that would mean a sustained rally in Treasuries and lower yields. But this time, the opposite happened—yields shot higher.
The implications weren’t limited to the U.S. In the U.K., bond markets mirrored the instability, with yields posting their sharpest jump since the 2022 Truss-era crisis. Around the world, sovereign debt markets appeared to be pricing in a new era of uncertainty.
Ole S. Hansen of Saxo Bank suggested that the sudden surge in long-term yields could point to foreign divestment. “The scale of selling was comparable to the early days of the pandemic. There’s a chance foreign holders, including central banks, were repositioning out of U.S. debt,” he noted.
That speculation quickly turned toward China. Reports circulated that Beijing had offloaded $50 billion in Treasuries. Given China’s long-standing role as one of America’s biggest creditors, the theory gained traction fast. Yet skeptics, including Jim Bianco of Bianco Research, pushed back.
“If China were liquidating Treasuries and converting the proceeds into yuan or other currencies, the dollar would have weakened significantly. Instead, the Dollar Index rose sharply,” Bianco wrote. “That suggests the selling pressure came from within the U.S., driven by inflation expectations and political risk—not geopolitics.”
Indeed, while China remains a major holder of U.S. debt—with $761 billion as of January 2025—its portfolio is concentrated in short-term and agency securities. Moreover, economist Michael Pettis has repeatedly emphasized that China’s Treasury holdings are a byproduct of its trade surplus, not a weapon to be wielded lightly. Dumping U.S. debt en masse would destabilize its own economy and currency.
Still, the episode reveals how fragile assumptions about global capital flows have become. In a multipolar world marked by inflation uncertainty, populist politics, and increasingly confrontational trade dynamics, even the once-predictable U.S. bond market can behave unpredictably.
This week’s bond turmoil was not just a market story—it was a symptom of deeper realignments in the global order.
