Karishma Vanjani

The U.S. debt market shrugged off a report Monday that China urged its banks to cut their exposure to U.S. Treasuries.

The yield on the 10-year Treasury note ended Monday at 4.201% or slightly lower than it was the day before, after briefly inching up earlier in the day. The 4.2% level has become an anchor for the market, with yields barely diverging from that point since mid-January. Prices and yields move in opposite directions.

The market's relative inertia is remarkable given that Beijing advised some of its biggest banks in recent weeks to limit purchases of Treasuries or pare down their holdings, according to a Bloomberg story citing people familiar with the matter.

Chinese regulators framed it as a way to diversify market risk without giving the banks any specific time or size to disinvest, the story mentioned.

Any 'quiet quitting' by Chinese banks would add to growing concern that foreigners are exiting the Treasury market because of worries over the staggering size of U.S. debt. The more the debt supply, the higher the anxiety the U.S. won't be able to pay back its lenders.

Growing tensions with other countries on policies proposed by President Donald Trump add to the risk.

Yet, the threat appears less daunting when put in context. China's banking sector has $297.8 billion in dollar-denominated bonds, according to the State Administration of Foreign Exchange. While this likely includes U.S. Treasuries, it doesn't specify what portion consists of Treasuries versus corporate or other foreign dollar-denominated bonds.

Losing this source of demand would be a blow to the $30.3 trillion U.S. Treasury market, but the impact remains difficult to measure.

Another reason for the lack of reaction is that the threat to sell Treasuries isn't entirely new. China has been a net seller of U.S. Treasuries for nine straight months now, selling a net $5.39 billion of U.S. debt in November, the latest month for which data is known. Chinese institutional investors such as hedge funds and its central bank together own $683 billion in Treasuries.

"Prospects for foreign diversification away from Treasuries have been on the market's radar for some time, and as a result, it was unsurprising to see that the news was worth no more than 3-4 basis points higher in 10- and 30-year rates," writes Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

Investors are also reassured by statements from Treasury Secretary Scott Bessent when he appeared before the U.S. House Committee on Financial Services last week. Bessent said the Treasury saw a record amount of foreign inflows into auctions last year while volume of transactions remain high.

That means that while the 'Sell America' sentiment persists, more evidence is needed to spook the bond market in 2026. A gauge of Treasury volatility, as measured by the MOVE Index, hit its lowest point in more than four years on Jan. 26.

The "quiet selling story surrounding U.S. assets has not really come up to bite us," Padhraic Garvey, who leads ING's research team for the Americas, told Barron's last week. But "it's also not gone away, and is unlikely to."

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 09, 2026 16:06 ET (21:06 GMT)

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