Global Retreat From US Treasuries Deepens: What It Signals for Risk Assets

Foreign countries are retreating from US debt markets. Denmarks holdings of US Treasuries are slipping to record lows, while India and China continue to scale back their exposure to US government debt. This sustained retreat by major foreign holders points to a broader erosion of confidence in US fiscal discipline and long-term debt sustainability. This trend has major implications for global capital costs, liquidity conditions, and risk asset valuations. Foreign Demand for US Debt Fractures as Some Exit and Others Double Down In a latest post on X (formerly Twitter), The Kobeissi Letter, highlighted that over the past year, Denmark reduced its US Treasury holdings by $4 billion, a 30% decline. Denmarks US Treasury holdings are at record lows: The value of US Treasuries held by Denmark is down to ~$9 billion, the lowest in 14 yearsDenmark is quietly exiting US debt market, the post read. Since peaking in 2016, Danish holdings have dropped by more than half. The country now accounts for less than 1% of Europes total holdings of US government securities, valued at $3.6 trillion. Furthermore, Danish pension fund AkademikerPension has stated it will fully divest from US Treasuries worth around $100 million by the end of the month. The funds Investment Director, Anders Schelde, noted that the decision is rooted in the poor US government finances. 🚨🚨🚨!!! Danish pension fund to sell and exit US Treasuries !!!🚨🚨🚨This could lead to a sell off from other holders. Holders that have been turned on, threatened and attacked politically. This could be extremely, extremely damaging to the United States. Nonetheless, while speaking to reporters at the World Economic Forum in Davos, Switzerland. US Treasury Secretary Scott Bessent on Wednesday dismissed the concerns. Denmarks investment in US Treasury bonds, like Denmark itself, is irrelevant, he said. That is less than $100 million. Theyve been selling Treasurys for years, Im not concerned at all. While Denmarks move may not concern Bessent on its own, it is far from an isolated case. According to data released by the US Department of the Treasury, Chinas US Treasury holdings have dropped to a 17-year low. Chinas holdings fell to $682.6 billion in November, down from $688.7 billion in October, marking the lowest level since 2008. And if they continue like this, theyll be below 500bn soon, below Belgium and Luxembourg haha. China is insulating itself from the incoming crash in the West, a market watcher wrote. India has followed a similar path, with its US Treasury holdings dropping to around $190 billion by the end of October 2025. Taken together, these actions point to a fundamental reassessment of US credit risk among major foreign holders. The scale and persistence of these reductions suggest more than routine portfolio rebalancing. Instead, they reflect growing concern over Americas fiscal sustainability and the risk of policy-driven deterioration in credit quality. There is, however, a counterbalance. Japan and the UK have increased their holdings. Japans exposure rose by $2.6 billion to $1.2 trillion. In addition, the UK expanded its holdings by $10.6 billion to $888.5 billion. Liquidity Cascade and Implications for Crypto Nevertheless, an analyst has warned of a looming big storm as countries accelerate their sell-off of US Treasuries. The post explained that treasury liquidations create ripple effects across global markets. US Treasuries play a central role in the global financial system. When large volumes of Treasuries are sold, bond prices tend to fall, and yields rise, increasing borrowing costs across the economy. Higher yields can lead to tighter financial conditions, as more expensive funding discourages risk-taking and reduces available liquidity. Analysts note that in such environments, assets that depend heavily on abundant liquidity, including equities and cryptocurrencies, may come under pressure. Furthermore, US Treasuries are the main collateral for banks, funds, and market makers. Falling Treasury values impair collateral, pushing financial institutions to lower risk exposure. This, in turn, triggers selling pressure across many asset classes. Stocks and crypto do not live in a vacuum. They are built on cheap funding + easy liquidity. So when bonds get hit, it is not boring bond stuff. It is collateral getting weaker, Wimar stated. The analyst outlined a sequence of how markets could respond. Bonds typically move first. Equity markets tend to react later, reflecting changes in funding conditions and investor risk appetite. Cryptocurrencies, which are highly sensitive to liquidity and leverage, often experience the sharpest price swings as risk aversion sets in. This chain reaction means that disruptions in the Treasury market can threaten the entire risk asset space.