World Pulls Back From US Debt As Dollar Faces Pressure | WION World Business Watch

Added: 2026-05-21

[00:00:01]Next up, global investors are pulling back from one of the world's safest assets, US government debt. Japan and China both reduced their exposure, while concerns over America's growing borrowing burden and the future path of US interest rates are adding to investor anxiety.

[00:00:18]Yet, despite the sell-off, analysts say the dollar and the Treasury market still remain the backbone of the global financial system. Here's a report decoding the dollar sell-off and its wider implications. Take a look.

[00:00:35]Global investors are beginning to pull back from US government debt as rising geopolitical tensions and inflation concerns shake confidence in bond markets. Seven of the top 10 foreign holders reduced their exposure, including Japan and China.

[00:00:51]At the same time, investors are reassessing inflation risks and the future path of US interest rates under new Federal Reserve chair Kevin Warsh.

[00:01:02]Rising oil prices have added to fears that inflation could stay elevated for longer, forcing markets to rethink [music] expectations of rate cuts this year.

[00:01:13]The pressure on the US bond market is already visible in yields. The benchmark 10-year Treasury yield climbed above 4.6% this week, while the 30-year yield touched its highest level since 2007.

[00:01:27]Higher yields reflect falling bond prices as investors demand better returns to compensate for inflation and rising debt risks.

[00:01:36]Analysts say the Gulf conflict has added another layer of stress to the market.

[00:01:41]Higher energy prices are feeding inflation concerns globally, while disruptions in trade and shipping have also reduced the oil surplus earned by Gulf exporters.

[00:01:52]That in turn may weaken their ability to continue buying large amounts of debt.

[00:01:58]Despite the recent pullback, analysts say a large-scale exit from US assets remain unlikely for now.

[00:02:06]The US dollar and Treasury market still offer unmatched liquidity and remain the world's largest and deepest financial safe haven.

[00:02:15]Economists point out that there are few realistic alternatives capable of absorbing global capital flows at the same scale.

[00:02:24]China, however, continues to gradually diversify its reserves away from US assets. The People's Bank of China has increased its gold holdings for 18 consecutive months with reserves rising to more than 74 million [music] ounces by April.

[00:02:41]Gold is increasingly being viewed as a hedge against geopolitical and financial uncertainty.

[00:02:47]China is also pushing for yuan-based trade to counter dollar dominance.

[00:02:55]Still, economists say China continues to accumulate large amounts of US dollars [music] through trade, making the Treasury market a natural destination because of its liquidity and relatively high yields.

[00:03:08]While the latest data points to rising caution towards US debt, markets believe any shift away from Treasuries is likely to remain gradual rather than sudden.

[00:03:19]There are also growing concerns over America's long-term debt sustainability as borrowing costs rise.

[00:03:25]Investors are increasingly questioning how long the US can continue financing large deficits without facing market pressure.

[00:03:34]The combination of war risks, inflation fears, and uncertainty has pushed many global funds to move towards equities or alternative assets.

[00:03:45]Business Bureau, VOA World is One.

[00:03:56]>> Hey.