I noticed an interesting situation in the bond market that could signal more serious problems. The yield on 10-year U.S. bonds soared to 4.22% despite trade shocks and volatility. It would seem that when investors flock to safe assets, bond prices should rise and yields fall. But the opposite happened.

Ole Hansen from Saxo Bank pointed out the scale of this movement. According to him, such spikes in yields haven't been seen since the pandemic. 30-year bonds jumped from 4.30% to 4.65%, and 10-year bonds rose from 3.85% to 4.17% in a single day. Hansen suggested this could be a signal of foreign asset repatriation, especially by China, which allegedly unloaded about $50 billion in treasury securities.

But Jim Bianco intervened with an interesting counterargument. He pointed to the movement of the dollar index, which increased by 2.2% over three days. If foreigners had really sold bonds on such a scale, they would have had to convert dollars into foreign currency, which would have led to a decline in the dollar. Instead, the dollar strengthened. Bianco believes that the sales were more likely domestic and related to inflation fears rather than geopolitical pressure.

As of the beginning of the year, China still held about $761 billion in U.S. government debt, but most of its investments in dollar assets are concentrated in short-term instruments, agency bonds, and bank deposits, not long-term securities. Economist Michael Pettis has long explained that Chinese investments in treasury bonds are directly linked to the current account surplus and cannot simply be used as a weapon against the U.S.

Meanwhile, while everyone discusses bonds and trade wars, the crypto market is swinging just as wildly. Bitcoin fluctuated by as much as 10% during the day, and its price is currently around $72.69k with a daily gain of 1.42%. Interestingly, even Bhutan, which once actively accumulated Bitcoin through hydroelectric power, seems to have slowed or halted mining, selling about 70% of its reserves last year.

All this points to one thing: volatility is spreading across all asset classes. The yield on 10-year U.S. bonds remains in focus because it’s a key indicator of how expensive refinancing government debt is becoming. If this yield continues to rise, it will put pressure on the entire financial market, including crypto. We’ll keep an eye on how this develops.