The US Treasury market has come under pressure after President Donald Trump’s sweeping tariff announcements triggered a widespread sell-off in bonds. As policy decisions with deep financial implications are rapidly made and reversed, it is understandable that holders of US assets might feel a sense of unease.
Two factors are at play in the Treasuries market: the large volume of investments by hedge funds and other investors in highly leveraged trades, as well as foreign investors potentially stepping away to diversify assets from the US. Some investors have grown concerned that this turmoil could be on the verge of creating a liquidity event, where Treasuries cannot be easily bought or sold without causing significant price changes.
There has been significant attention on non-US investors selling Treasuries. Data is sparse in rates markets, but we have not seen evidence of widespread divestment by non-US investors to date. However, there are signs that international buyers could be eschewing Treasury auctions as they diversify their reserves into other currencies. At the same time we are seeing long-term yields rise, we are also seeing the US dollar weaken.
If global investors are beginning to shun the US Treasury market, it would be cause for concern, as it takes away a large buyer and could put more pressure on rates. But when talking about any one individual actor dumping assets, it is worth pointing out that the holders of Treasuries are a lot more dispersed than they were even 10 years ago.
