Overseas players are withdrawing from the US Treasury bond market. Denmark's holdings of US Treasury bonds have decreased to a record low, and India and China are also reducing their investments in US government bonds.

Such ongoing withdrawals by major foreign holders indicate a widening loss of credibility regarding US fiscal discipline and long-term debt sustainability. This trend has a significant impact on global capital costs, liquidity environments, and risk asset valuations.

Overseas demand for US Treasury bonds is divided, with some withdrawing and some strengthening.

In a recent post on X (formerly Twitter), The Kobeissi Letter pointed out that Denmark sold $4 billion worth of U.S. Treasuries, resulting in a 30% reduction over the past year.

"Denmark's U.S. Treasury holdings are at a record low: Denmark's U.S. Treasury holdings have fallen to about $9 billion, reaching a 14-year low... Denmark is quietly exiting the U.S. Treasury market," according to a post.

Denmark's holdings have more than halved since peaking in 2016. Currently, Denmark accounts for less than 1% of the total U.S. government securities holdings of $3.6 trillion across Europe.

Furthermore, Denmark's pension fund, AkademikerPension, has announced that it will sell all of its U.S. Treasury bonds worth about $100 million by the end of this month. The fund's chief investment officer, Anas Shelde, stated, "This decision is rooted in the deterioration of the U.S. fiscal situation."

Meanwhile, at the World Economic Forum held in Davos, Switzerland, U.S. Treasury Secretary Scott Bessent dismissed these concerns to reporters.

"Denmark's investments in U.S. Treasuries and Denmark itself are not significant. It is less than $100 million. They have been selling U.S. Treasuries for years, and I am not worried at all," he said.

Even if Mr. Bessent has no concerns regarding Denmark's actions, this is not an isolated case. According to publicly available data from the U.S. Treasury, China's U.S. Treasury holdings have fallen to a 17-year low.

China's holdings decreased to $682.6 billion in November, down from $688.7 billion in October, marking the lowest level since 2008.

"If this continues, it will soon drop below $500 billion, becoming less than that of Belgium or Luxembourg. China is defending itself against the impending collapse from the West," a market watcher wrote.

India is taking similar actions, with its U.S. Treasury holdings decreasing to about $190 billion by the end of October 2025. These movements indicate a fundamental reassessment of U.S. credit risk by major foreign holders.

The backdrop to this significant and ongoing decline is rooted in reasons beyond mere portfolio adjustments. Rather, it reflects growing concerns about the sustainability of U.S. fiscal policy and the risk of credit deterioration.

However, Japan and the UK are increasing their holdings. Japan has raised its holdings by $2.6 billion to $1.2 trillion, while the UK has also increased by $10.6 billion to $888.5 billion.

Liquidity cascades and their impact on cryptocurrencies

Nonetheless, analysts warn that as countries accelerate the sale of U.S. Treasuries, a "big storm" is approaching. The post explained that the sale of U.S. Treasuries could create ripples throughout global markets.

U.S. Treasuries are a central part of the global financial system. If large-scale selling occurs, bond prices will fall, yields will rise, and the overall cost of financing for the economy will increase.

The rise in yields tightens the financial environment, and the increased cost of financing suppresses risk-taking and reduces liquidity. In such situations, assets that rely on abundant liquidity, such as stocks and cryptocurrencies, are likely to come under pressure, analysts point out.

Additionally, U.S. Treasuries serve as key collateral assets for banks, funds, and market makers, but when U.S. Treasury prices fall, the value of collateral declines, forcing financial institutions to reduce their holdings of risk assets. As a result, selling pressure spreads across multiple asset classes.

"Stocks and cryptocurrencies do not move in a vacuum. They rely on cheap financing and accommodative liquidity. So if bonds are hit, it's not just a matter of 'boring bonds'; it means that collateral is weakening," said Mr. Wimar.

Analysts explained how the market might react to a series of events. First, bonds move. The stock market tends to react afterward by factoring in changes in the financing environment and investors' risk attitudes.

Cryptocurrencies, which are highly sensitive to liquidity and leverage, often show the most dramatic price fluctuations when risk aversion increases. This chain reaction could threaten risk assets across the board due to turmoil in the U.S. Treasury market.