- Global markets experienced extreme volatility Monday, with the U.S. 10-year Treasury yield swinging dramatically between 3.9% and 4.22% as Trump’s tariff announcements spooked investors.
- The volatility spread across all asset classes, including cryptocurrencies, with Bitcoin fluctuating by as much as 10% during a single trading day.
- Experts are divided on whether China is selling U.S. Treasury bonds as retaliation, with some analysts pointing instead to domestic inflation concerns as the primary driver of market instability.
Markets experienced extraordinary volatility Monday, rivaling the tumultuous trading seen during the COVID-19 crash of March 2020. Global investors found themselves caught between escalating tensions as the United States and China engage in a trade standoff, with neither economic superpower showing signs of backing down following President Trump’s announcement of sweeping import tariffs.
The instability wasn’t limited to stock markets, as it rippled through every financial asset class. Bitcoin (BTC) demonstrated the extreme nature of the volatility, swinging as much as 10% within a single trading session. However, analysts focused primarily on movements in the U.S. 10-year Treasury yield—considered the risk-free interest rate benchmark—which the Trump administration has stated it wants to lower to help refinance the national debt.
Treasury yields plummeted from 4.8% late last week to 3.9% after Trump’s tariff announcements initially triggered a flight to safety. Unusually, as market anxiety intensified Monday, yields reversed course and surged to 4.22%, defying the typical pattern where bond prices rise (and yields fall) during periods of heightened risk aversion.
Global Bond Market Turmoil
The bond market upheaval extended well beyond American shores. The United Kingdom experienced its sharpest interest rate jump since the Liz Truss-era pension crisis in October 2022, with similar yield spikes occurring across global sovereign debt markets, signaling widespread concerns about currency and debt stability.
Ole S Hansen, head of commodity strategy at Saxobank, noted the magnitude of the Treasury market moves, suggesting something significant might be unfolding. “U.S. Treasuries suffered a massive sell-off yesterday, with long yields rising the most since the turbulence during the pandemic outbreak—a possible sign of large holders of Treasuries, such as foreign holders, selling and repatriating their assets,” Hansen wrote on X.
Competing Market Narratives
While Hansen and others speculated about foreign selling—particularly from China, which reportedly offloaded $50 billion in Treasuries—some experts challenged this explanation. Jim Bianco, president of Bianco Research, disputed the foreign selling narrative, pointing to the Dollar Index’s 2.2% three-day rally as evidence.
Bianco argued that if China were selling Treasuries to punish the U.S., we would see dollar weakness, not strength. “This suggests that foreign money was moving into the U.S., not away from it… the selling was more domestic and more concerned about inflation,” he explained.
The theory that China could leverage its Treasury holdings as a trade war weapon appears questionable. As economist Michael Pettis has argued, China’s holdings are tied to its current account surplus and cannot be effectively weaponized against the U.S. China has been gradually reducing its Treasury investments since 2013, with its holdings standing at approximately $761 billion as of January 2025.
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