If there’s one thing that catches the attention of the second Trump administration, it’s how foreign investors behave toward U.S. assets. Perhaps most notably, it’s their attitude toward the safe haven of U.S. Treasuries.
Last month, Deutsche Bank earned the ire of Treasury Secretary Scott Bessent after one of its analysts suggested foreign investors may leverage their holdings of U.S. borrowing and equities against the White House’s threats over the sovereignty of Greenland. While Bessent dismissed the “irrelevance” of Denmark’s holdings of American debt, Trump eased up on his tariff rhetoric after the bond markets hiccuped.
The Trump administration is therefore unlikely to be pleased with reports this week that Chinese banks had been urged to limit their holdings of U.S. Treasuries. Bloomberg reported this morning, citing unnamed sources, that Chinese regulators had advised financial institutions against holding large amounts of U.S. government debt because of questions about volatility and security.
Minding the Bloomberg report, UBS’s Paul Donovan noted this morning that it is nevertheless of note that foreign investors are being advised to rethink their strategy. He said the report “does not include the official holdings, and China’s banks are not major players in the U.S. Treasury market. Nonetheless, the idea that international investors may be less inclined to buy U.S. Treasuries in the future (without dumping existing holdings) is getting attention in markets.” (China is the third-largest holder of U.S. Treasuries.)
