China Selling US Treasuries? 30-Year Bond Sees Biggest Drop in 40 Years

Besent Finance Warns "China's Sale of US Treasuries Contradicts Our Goals"

30-Year Treasury Yield Jumps 47bp in Three Days

Unusual for US Treasuries to Plummet During Stock Downturn

The sell-off of US Treasuries is accelerating, causing the 30-year bond yield to rise at the fastest rate in 40 years. Since bond yields and prices move in opposite directions, this means US Treasury prices have plummeted unusually.

It is speculated that China is selling US Treasuries, prompting Besent US Treasury Secretary to warn that "China's sale would contradict our goals."

According to MarketWatch on the 9th (local time), the 30-year yield surged 14 basis points (1bp=0.01%) in the morning to 4.858%, rising 46.7bp over three days. If it closes at this level, it will mark the largest three-day increase since January 1982.

The iShares 20+ Year Treasury Bond ETF fell 3% in pre-market trading to $85.72, an unusual drop for a Treasury ETF.

MarketWatch pointed out that this is more severe than the 1.9% drop in S&P futures.

Rising Treasury yields are rarely seen during stock sell-offs. Investors typically sell risky assets like stocks and buy Treasuries during times of high uncertainty. However, despite the stock sell-off this week, Treasuries are also being sold.

While the 30-year bond has been hit the hardest, other maturities have also been affected. The 10-year Treasury yield rose to 4.380%, marking the largest three-day increase since the summer of 2022.

There is much speculation that foreign governments are leading the sell-off. As emerging market currencies plummet, foreign central banks are selling Treasuries and using dollars to buy their own currencies to support their assets. It may also be because foreigners no longer favor US assets.

There is much speculation that China, which holds a large amount of US Treasuries, is selling. Louis-Vincent Gave of Gavekal Research analyzed that "China may be reducing its holdings of US Treasuries before exchanging US dollars for gold or currencies of less hostile countries (Europe, Japan, Australia, Canada, etc., commodity-producing countries)." He added that "the fact that US Treasuries seem to have fallen particularly sharply in Asian markets supports this explanation."

US Treasury Secretary Scott Besent warned in the morning that "if China sells US Treasuries, it would contradict our goals."

Andrew Brenner, head of international fixed income at NatAlliance Securities, said, "The bond market is in crisis," adding, "This is not what we expected."

Guest reporter Kim Jung-ah kja@hankyung.com