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The U.S. 10 year bond yield fell well below 4.5% as we write, as the U.S. Treasury held a successful auction and showed there are still buyers out there for U.S. debt. The 10 year bond had spiked above 4.5% as traders feared China and possibly Japan were selling U.S. bonds, driving up yields.
Traders are looking at a number of theories to explain the move in bonds, ranging from forced selling by hedge funds getting margin calls to more troubling speculation of foreign holders dumping U.S. government securities.
The largest holders of Treasurys — and potential bidders in these auctions — are Japan, China and the U.K., the very countries the U.S. has targeted with some of the highest tariffs, reported CNBC.
The large and sweeping tariff implementation by the Trump administration likely caught many asset managers off guard, and now they are caught on the wrong side of the trade, creating margin calls to sell assets to cover the house. The assets they seem to have been selling are Treasuries, crypto, and precious metals.
Goldman Sachs is reportedly calling a 200 basis point interest rate cut from the Fed in the next FOMC meeting.
There is no evidence yet of large scale selling of U.S. debt by foreign nations, although steady methodical selling is still a thing.
