Rising US Yields and China's Treasury Exit Spark Fear of EU's $10 Trillion Asset Sell-Off

According to financial commentary from Sean Foo (@SeanFooGold), the global financial system is under strain, marked by a significant rise in US Treasury yields and strategic shifts by major foreign holders. In recent days, the yield on the 10-year US Treasury note surged from 4.13% to 4.26%, its highest level since September 2025. This spike increases borrowing costs across the US economy, from mortgages to corporate debt, at a time when the nation's annual net interest payments have surpassed $1 trillion.

China is actively reducing its exposure, decreasing its US Treasury holdings by over $6 billion in November to a total of $682 billion—the lowest level since 2018. Beijing's strategy appears to be a long-term pivot away from funding what it perceives as adversarial policies, instead focusing its foreign assets on direct investments, supply chains, and gold. This move away from the traditional "vendor finance" model of recycling trade surpluses into US debt signals a profound shift.

The analysis suggests that the European Union (EU) holds a massive $10 trillion in US dollar assets, including Treasuries, corporate bonds, and equities. With escalating tensions over issues like US interest in Greenland, the possibility of the EU restricting investments or selling assets is framed as a potential "nuclear" retaliatory option. Such a move could force the Federal Reserve to monetize more debt, potentially leading to higher inflation and further dollar depreciation. This scenario highlights the growing perception that geopolitical actions are directly undermining confidence in US financial assets and the stability of the dollar-based global trade system.