The U.S. 10-Year Treasury Is Drifting Away From a Trump-Friendly Path

Markets were rocked Monday by a level of volatility not seen since the COVID-era crash of March 2020, with bond markets at the epicenter of the chaos and fears growing over the integrity of the global financial system.

The trigger: President Donald Trump’s new wave of sweeping tariffs on Chinese goods, which sent shockwaves across global equities and pushed investors into traditionally “safe” assets. But instead of calming markets, the move exposed deep fractures—particularly in U.S. Treasury markets.

Initially, the 10-year U.S. Treasury yield plummeted from 4.8% to 3.9% as investors fled to safety. But that relief rally quickly evaporated. Yields unexpectedly surged back to 4.22% on Monday, defying the typical risk-off playbook and sparking fears that something more fundamental was breaking down.

Longer-duration bonds were hit even harder. The 30-year yield soared from around 4.30% to 4.65%, echoing the violent swings seen during early pandemic trading.

“This isn’t normal market behavior,” said Ole S. Hansen of Saxo Bank. “The scale and speed of the sell-off in long-term Treasuries suggests we could be seeing a strategic retreat by major holders—possibly foreign institutions pulling their capital.”

Speculation quickly turned to China. Rumors swirled that Beijing had liquidated as much as $50 billion in U.S. debt. If true, it would mark a major shift in global capital flows and an escalation in the financial front of the ongoing trade conflict.

But skeptics were quick to challenge the theory.

Jim Bianco of Bianco Research argued that if China or other foreign powers were indeed dumping Treasuries, the dollar should have fallen. Instead, the U.S. Dollar Index surged more than 2% over three days—indicating rising demand for greenbacks, not a mass exodus.

“This wasn’t foreign selling. This was domestic,” Bianco said. “Investors are pricing in sticky inflation and growing uncertainty about fiscal policy. The bond market is sending a warning.”

While the exact source of the pressure remains unclear, China’s influence is likely overstated. As of early 2025, China still holds approximately $761 billion in U.S. government bonds, second only to Japan. But most of these are shorter-term instruments, not the long-duration Treasuries under fire.

And as economist Michael Pettis has long explained, China’s bond holdings stem from its trade surplus and can’t be easily “weaponized” without undermining its own currency and financial system.

Still, the message from Monday is clear: The global bond market is no longer immune to geopolitical stress. As inflation jitters mount and great-power tensions rise, the once-predictable behavior of Treasuries is turning into a wild card.

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