According to Bloomberg’s report on Monday, February 9th, as disclosed by sources familiar with the matter, regulatory authorities in China have verbally requested some large commercial banks in recent weeks to limit their purchases of US Treasury bonds and instructed banks with higher exposure to reduce their positions.
The latest official directive reflects concerns from Chinese regulatory authorities about the risks commercial banks may face from holding large amounts of US Treasury bonds, but this directive does not apply to the US Treasury bonds held by Chinese official entities themselves.
Insiders mentioned that this official directive does not apply to China’s sovereign foreign exchange reserves but specifically targets commercial banks. The directive does not specify the scale or timetable for adjustments. Regulators stated that this move aims to diversify market risks rather than being driven by geopolitical maneuvers or fundamental concerns over US credit ratings.
As a result of this news, US Treasury bond prices have declined, and yields on various tenors of bonds in the Asian afternoon trading session saw a slight uptick. The US dollar weakened slightly against major currencies.
For Chinese commercial banks facing increased economic risk in domestic investment activities and lacking alternative investment channels, reducing holdings of US Treasury bonds means cutting off a significant source of revenue.
Over the past 12 months, US Treasury bonds have risen by 5.3%, ranking just behind Singapore and Israel in the sovereign debt markets of major developed countries.
Fortune magazine reported that the Trump administration may likely be displeased with China’s request for Chinese banks to limit their holdings of US Treasury bonds.
In January, an analyst at Deutsche Bank suggested that foreign investors might use their holdings of US bonds and stocks to counteract the White House’s suggestion of acquiring Greenland, drawing a public response and condemnation from Scott Bessent, the US Treasury Secretary.
Despite speculation in the market about investors quietly exiting or selling off US Treasury bonds, there has not been widespread panic triggered by foreign investors selling off US Treasury bonds or losing confidence in this traditional safe-haven asset. On the contrary, indicators measuring US Treasury bond volatility have hit their lowest levels in five years.
Bessent deliberately refuted claims in the market about selling off US bonds, highlighting that the performance of the US Treasury bond market in 2025 was the best since 2020 and set record foreign demand levels in bond auctions.
According to Kathleen Brooks, Director of Research at XTB Trading Platform, the initial scale of selling off US Treasury bonds is still very limited.
She stated, “If Beijing were to initiate a large-scale (US bond) selling-off strategy, it would cause a significant spike in US and global bond yields and have a major impact on the global economy.”
“Market participants widely believe that Beijing won’t take such action, and even if reductions in US bonds occur, it will be done gradually,” she added. “This is why yields have largely remained stable.”
Martin Whetton, Chief of Financial Market Strategy at Westpac Banking Corporation, told Bloomberg that due to most of the US Treasury bonds being held by Chinese official entities for liquidity reasons, these debt durations might be relatively short.
He added, “Hence, the scale of holdings by commercial banks is limited, and China has not caused any waves in the US Treasury bond market in monthly bond auctions.”
Analysts also point out that even if Beijing were to conduct a large-scale sell-off, it may not achieve the desired results due to various constraints.
Analysts believe that China cannot create such a massive impact on the US Treasury bond market as theoretically anticipated in comparison to other countries.
While China is the third-largest foreign holder of US Treasury bonds after Japan and the UK, Japan holds nearly twice the amount of US Treasury bonds as China, and the UK also holds around $888 billion in US Treasury bonds.
Over the past decade, the total amount of US Treasury bonds held by entities in mainland China and the private sector has steadily declined. The size of US Treasury bonds held by Chinese investors peaked at $1.32 trillion in 2013 and dropped to $682.6 billion in November 2025, the lowest level since 2008.
Some analysts suggest that the actual reduction in China’s holdings of US Treasury bonds might be smaller because Beijing may have transferred some of the US Treasury bonds it held to custody accounts in Europe.
Market analysts note that Belgium’s holdings are considered to include US Treasury bonds from Chinese custody accounts. Since the end of 2017, Belgium’s US bond holdings have tripled, reaching $481 billion.