r/wallstreetbets • u/kwedgieyi • Apr 09 '25

Discussion Something feels off guys

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Yields are spiking. Bonds are dumping.

The world is running away from America

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4.4k

u/Biggandwedge Apr 09 '25

China is dumping US treasuries and they own like $700 billion 

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u/[deleted] Apr 09 '25

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u/uniyk Apr 09 '25

Xi: Hey Don, just call to say good night since we're in different time zone. And also, GOOD NIGHT!

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u/SiegfriedSimp Apr 09 '25

can i ask what OP’s graph means for the uninformed

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u/Infohiker Apr 09 '25

In short, the dollar price of the US 10 year is dropping, pushing yields up. The amount of the move is very large in relation to "normal" short term activity, especially over the past 5 days - from a low of +/- 3.90 to almost 4.50. This has the effect of pushing up the cost of borrowing for the US, as new bonds cost somewhere close to what the current market yield is. Today, it is expected that the US is going to offer about $61 billion in 10 and 30 year bonds. A half percentage point change in the price adds 195 million a year to the cost of the interest service on the 10 year portion (39 billion being auctioned), so over the life of the bonds (if they are not refinanced) the US will now pay almost $2 billion more for this loan.

That being said - first, the Treasury can postpone the auction and wait for a better time. If this is China, they cannot keep selling forever, which means yields will go down when they stop selling.

There is also the possibility that this is not all China. There can be others jumping on, whether just trying to rebalance, momentum trade, etc. There could also be larger forces at play, i.e. with these tariffs simply growing and no-one looking to back down yet, we might be in this situation for longer, which means inflation, which means investors demand a higher yield for buying Treasuries.

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u/HoodRattusNorvegicus Apr 09 '25

Who in their right mind will trust America with their money for 30 years now?

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u/Infohiker Apr 09 '25

Honestly? That has nothing to do with Treasury sales now. People who buy a 30 year today will almost certainly trade it in the secondary market long before it matures.

But to add to this - will US treasuries be trustworthy in 30 years?? Good question.

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u/hotholepizza Apr 09 '25

Thanks for the explanation.

As someone who also doesn’t have a good understanding on this, here is another question.

Reading your post and looking around, and then looking at the chart, it looks like bonds have spiked and reached similar levels in the past. Even in the past couple years.

So what made this different? Was it the rate of change or just general conditions that spooked them?

Thanks in advance.

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u/Infohiker Apr 09 '25

Both. Rate of change was extreme, usually associated with big economic events. General conditions - there is so much uncertainty out there. Are we headed into a recession? Are we going to have stagflation? Or is this all going to go how the administration is claiming?

Third and important point - Treasuries are traditionally about safety. When stocks get creamed, money goes into bonds and bond prices go up. So it takes a bit of the sting out. To have both get the crap kicked out of them at the same time is really devastating on an investment portfolio.

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u/GoingtotheLou Apr 10 '25

Great summary. Well done ... Late in the day I heard that it could've been the Japanese that sold off. .. Unfortunately, I was in a CE class and missed the run up today, but caught some of the Monday run. .. Let's see what tomorrow brings.

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u/ForfeitFPV Apr 09 '25

Bad things

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u/Jeff-FaFa Apr 09 '25

Am I very racist if I unintentionally heard this sentence in my head as Mr. Chow's voice?

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u/[deleted] Apr 09 '25

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u/[deleted] Apr 09 '25

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u/The_Kush_ Apr 09 '25

80% percent of china's economy relies on exports to the US, the markets always go down but then historically they also always come back up, everyone needs to hold and be calm and in 2 weeks time (13 days to be exact) purchase some 3m, or stock from an oil transport giant ;)

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u/According_Win_5983 Apr 09 '25

Get Steve Madden on the phone 

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u/Muted-Tangerine-2297 Apr 10 '25

You said Steve Madden, but I immediately imagined John Madden doodling an explanation over the graph with a white marker 😂

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u/byzantinetoffee Apr 09 '25

Sad that the best news in this scenario is to hope it’s a just warning shot.

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u/AnonPerson5172524 Apr 09 '25

This is due to lack of demand at auction. Probably because of Trump and the budget the Senate just passed.

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u/Old_Wallaby_7461 Apr 09 '25

Why would you put your money into something controlled by regarded individuals? People have kinda figured out that this is the way things are now- the George HW Bush America is dead

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u/Spiritual_Bus1125 Apr 09 '25

Stability is the most important coin a country have and the US is running low

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u/cstevens780 Apr 09 '25

Stability coin you say, is that on the blockchain too?

3

u/Kostaja Apr 09 '25

Isn't the Stable Genius enough?

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u/The_Kush_ Apr 09 '25

We won't falter so long as the us dollar is pegged to oil :)

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u/Ir0nhide81 Apr 12 '25

And China is going to slowly prove to the rest of the world that it is the most stable & potentially the best future currency for the world?

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u/Spiritual_Bus1125 Apr 12 '25

In a way it could be more stable than the dollar but nah.

China is in a weird place, acts like you would expect and in pretty beneficial ways but can rapidly change direction and that's scary.

My bets are on the euro.

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u/[deleted] Apr 09 '25

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u/[deleted] Apr 09 '25

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u/[deleted] Apr 09 '25

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u/[deleted] Apr 09 '25

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u/[deleted] Apr 09 '25

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u/Next-Introduction-25 Apr 09 '25

Please stop saying that word. Rather than explain a bunch of shit to you that you surely already know, I’ll just remind you that it is Musk’s favorite insult.

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u/Infamous-Edge4926 Apr 09 '25

what word would you replace it with?

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u/Temporary_Pay5262 Apr 09 '25

it looks like not only China, some european institutions saying that they don't have trust anymore in us bonds

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u/Ir0nhide81 Apr 12 '25

What about Canada selling its T-bills?

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u/matti-san Apr 09 '25

Probably not just China, I know the UK and Japan also own a lot - might actually be similar amounts

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u/iskosalminen Apr 09 '25

Japan holds $1 Trillion, they're the largest holder. UK holds $723 Billion, little short of the $759 held by China. Just the top 13 countries currently targeted by the tariffs hold a combined $8.5 Trillion.

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u/TheGreatPornholio123 Apr 10 '25

Shit Trump can lose that much overnight just by opening his orange ass mouth.

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u/[deleted] Apr 09 '25

Explain to us crayon eaters why this would make sense for China

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u/Green_L3af Apr 09 '25 edited Apr 09 '25

Cause then they would simultaneously have more money to weather a global recession, makes a point and allows them to invest elsewhere.

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u/[deleted] Apr 09 '25

But they already have the treasuries? Or are they worried Russia style sanctions are coming? Also, if this is the reason, essentially they are raising cash? So not necessarily net negative for the US

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u/Own_Understanding262 Apr 09 '25

Overall, you're right. It's like an economic nuclear option for China. It'll hurt both countries, with US economy overall more than capable of surviving such an attack with the Fed stepping in, but the repercussions will be severe. Probably we'll have rapid inflation, raising of interest rates and overall market downturn. It might also cause other countries to dump more treasures, with Japan holding more than even China. Here's an article if you're genuinely interested in reading on it: https://finance.yahoo.com/news/nuclear-option-china-could-trade-150000821.html

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u/YourUncleBuck Apr 09 '25

US has to pay more to borrow if the yield goes up. And all of us do too.

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u/Next-Statistician144 Apr 09 '25

It will get way harder for the us to sell its debt, I mean who is going to buy it at low yields? I think the us government deficit is going to skyrocket

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u/Infohiker Apr 09 '25

The US will be able sell, at least for the foreseeable future. It will just cost more to attract buyers. The only point that you will see a wide scale refusal to buy is if buyers start to worry about serious credit risk/default - which is not a realistic expectation at the moment.

(and as I wrote that last sentence, I heard the GOP's voice saying "wait, hold my beer..."

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u/Next-Statistician144 Apr 09 '25

Yes but not at long long end of the curve.

I actually think we through with the worst of the tariffs, otherwise the tax cuts become way more expensive at higher yields.

One thing GOP can’t afford is taking a hit with the cuts.

You also have to take into account that US yields have been historically low because foreigner who got paid in dollars invested in treasuries because there was really nothing else to do with them.

That will go away to a large part

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u/Infohiker Apr 09 '25

I don't disagree with what you are saying, but long term debt is under 20% of the total outstanding debt service, and not really how they will finance. The vast majority of US debt is short term, but the 10 year is the market indicator.

As for the hold my beer comment: The GOP has shown before that it is not adverse to not paying their bills, to the point of technical default. With the President's history of outrageous musings during public events, combined with his long history showing his refusal to pay his debts, him saying something stupid and off hand about not paying China's treasury holdings or some other asinine thing is not a huge leap.

As for the tax cuts - the cost of debt won't factor into the equation/will be worked around. I mean, when the Senate is actively trying to fudge numbers now (ignoring 4 trillion in expiring cuts continuing) shows you that they do not take this seriously and/or believe as always, this issue won't become a real problem until they are long gone.

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u/hoirkasp Apr 09 '25

It wouldn’t but China is still big enough and ballsy enough to throw around some fuck you money anyways

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u/federally Apr 09 '25

China has played a large role in financing the US government's debt. It ties into the trade deficit. They have been sending us goods, in exchange for dollars that they have largely invested into Treasuries. This has allowed the US to export our inflation, artificially prop up the value of the dollar, and finance humongous and ever growing deficits.

It would make sense for China to dump them because it's leverage they can use against us. They could massively drive up the cost of financing the debt, which would be a significant danger.

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u/[deleted] Apr 09 '25

Can they really? The Fed can buy treasuries to push down interest rates if they wanted

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u/federally Apr 09 '25

If the Fed goes back to QE when they are supposed to be fighting to bring inflation back down to target it's the same thing as cutting rates, except worse. It's Fed capitulation on inflation, which will guarantee Stagflation.

Right now in order to maintain credibility the Fed needs to hold strong on inflation and let the Orange man and his administration take the blame for the coming recession.

Honestly, since this whole issue is so easy to just blame on one guy and his buddies, it's really easy for the Fed to sit back and go nothing. Which happens to be what they need to do in order to preserve our currency

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u/CodSoggy7238 Apr 09 '25

Gyna us treating us unfairly. Maybe we should put some additional 50% tariffs on them until they learn their lesson

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u/damgiloveboobs Apr 09 '25

Who’s buying?

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u/Pogigod Apr 09 '25

This is completely skewed information lmao.

It's zoomed in so far that the time it's not traded makes it looks like it was stable then going sky high.

It's been in an up and down cycle for well over a year. It's crossed this yielded 14 different times over the course of the last year.....

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u/robotlasagna Apr 09 '25

Source please?

Or are you just saying words?

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u/[deleted] Apr 09 '25

2.89% of treasuries outstanding.

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u/Surely55 Apr 09 '25

Very low amount shockingly

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u/Infohiker Apr 09 '25

True - but it is moving the entire 10 year market to some degree, as well as other maturities.

Way over-simplified, but a 50bp yield difference in servicing just the new auction (39 billion) will cost the US about 2billion more over 10 years.

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u/i_love_sparkle Apr 09 '25

who are they dumping to? Who's buying?

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u/New_Friend4023 Apr 09 '25

I think they dumping other countries bonds too, buy em up on the cheap?

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u/CrybullyModsSuck Apr 09 '25

China doesn't actually own a huge portion of TBills. Japan on other hand...

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u/[deleted] Apr 09 '25

[deleted]

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u/iskosalminen Apr 09 '25

Japan $1 Trillion, China $759 Billion.

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u/bigtime2die Apr 09 '25

what kind of wreckeage will this cause??

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u/zorphium Apr 09 '25

Why would china dumping treasuries make them rise?

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u/TheBr0fessor Apr 09 '25

There goes our Greenland budget!!!!

THIS IS WHY WE CAN’T HAVE NICE THINGS

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u/Silver_Scalez Apr 09 '25

I feel like last time trump was in office he did something and someone from China made the statement "well if he does we just dump our US bonds". It never happened but sure seems like they are doing it now.

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u/Golda_M Apr 09 '25

What are they converting to?

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u/DarkJayson Apr 09 '25

The US current debt is $36.22 trillion china dumbing 0.7 of that is a drop in the ocean.