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

Source: CryptoNewsNet Original Title: Global Retreat From US Treasuries Deepens: What It Signals for Risk Assets Original Link: Foreign countries are retreating from US debt markets. Denmark’s 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

Over the past year, Denmark reduced its US Treasury holdings by $4 billion, a 30% decline. The value of US Treasuries held by Denmark is down to approximately $9 billion, the lowest in 14 years.

Since peaking in 2016, Danish holdings have dropped by more than half. The country now accounts for less than 1% of Europe’s total holdings of US government securities, valued at $3.6 trillion.

Furthermore, a Danish pension fund has stated it will fully divest from US Treasuries worth around $100 million by the end of the month. The fund’s Investment Director noted that the decision is rooted in the poor US government finances.

While a US Treasury Secretary dismissed the concerns, stating that Denmark’s investment in US Treasury bonds is irrelevant, Denmark’s move is far from an isolated case. According to data released by the US Department of the Treasury, China’s US Treasury holdings have dropped to a 17-year low.

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

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 America’s 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. Japan’s 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

Analysts have warned of a looming “big storm” as countries accelerate their sell-off of US Treasuries. 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 and easy liquidity. So when bonds get hit, it is not merely “boring bond stuff.” It is collateral getting weaker.

Analysts 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.