Following President Donald Trump's announcement of the reciprocal tariff policy, major sell-offs continued in the bond market after the U.S. stock market, leading to growing controversy on Wall Street over whether China is behind this turmoil in Government Bonds.
According to foreign media including Bloomberg on the 12th (local time), the yield on U.S. Government Bonds has shown a sharp increase centered on long-term maturities of over 10 years since the 4th. This means that the price of Government Bonds has fallen rapidly.
Even around the market close in New York on the 11th, the 10-year yield approached 4.5% at closing, while the stock market regained some stability; however, the bond market still exhibits significant anxiety.
Typically, when stocks plunge, the price of U.S. Government Bonds rises due to a preference for safe assets, but this time, there is an unusual phenomenon where even Government Bonds are being sold off.
Experts point to concerns about inflation rebound due to tariff policies and America's structural fiscal deficit as fundamental backgrounds for this situation. Additionally, hedge funds participating in the derivatives market have recently liquidated their investment positions following fluctuations in the financial market, and some banks have reduced their purchases of Government Bonds or even initiated sales to secure liquidity, which is analyzed to have increased downward pressure in terms of supply and demand.
In particular, as the perception of Government Bonds as safe assets wavers, analyses suggesting that funds are beginning to flow out of the U.S. are gaining traction.
Moreover, some on Wall Street have raised claims that China is behind this chaos.
Ataru Okumura, chief interest rate strategist at SMBC Nikko Securities, noted in an investor memo that "China may be selling Government Bonds as retaliation against the U.S." and that there may be an intention to strengthen negotiation power by shocking the global financial market.
Ed Yardeni, founder of Yardeni Research, also said, "The fact that foreign holders including China may begin to sell assets is causing concern among bond investors."
However, there is also a skeptical view on whether China is directly selling. Prashant Newna, a strategist at TD Securities, stated, "This sell-off appears mainly in long-term bonds," adding that "it does not seem that China is selling." He mentioned that China's holdings of U.S. Government Bonds are shortening in maturity, so the selling impact may be limited.
In fact, it is difficult to confirm whether China is currently selling U.S. Government Bonds on a large scale until official statistics are released. The fact that China holds U.S. Government Bonds in the name of third-country financial institutions also hinders identifying the actual sellers.
However, even if China has not actually proceeded with selling, the mere possibility of it being able to "weaponize" U.S. Government Bonds may act as a factor for global investors to exit U.S. bonds.
Bloomberg reported that changes in China's U.S. Government Bonds holdings within its foreign exchange reserves in April can only be confirmed by the end of May, and more specific figures will only be ascertainable from U.S. Treasury data in mid-June.
According to data released by the U.S. Treasury as of January of this year, China's holdings of U.S. Government Bonds amounted to $760.8 billion, ranking second after Japan ($1.0793 trillion). While China has gradually reduced its holdings in recent years, it still possesses a significant volume.