Taiwan Whispers: Is China's Bond Bonanza About to Bust? US Treasury Yields Surge Amidst Speculation

A Potential Showdown? As US-China Tensions Escalate, a Dramatic Spike in Treasury Yields Fuels Market Speculation in Taiwan.

Tensions between the United States and China are reaching new heights, and the financial markets are feeling the heat. Following the implementation of reciprocal tariffs by the United States on September 9th, increasing the cumulative tariff rate to 104% on Chinese goods, the market is in flux.

On September 8th, the yield on the 10-year and 30-year US Treasury bonds jumped, reaching 4.339% and 4.82% respectively. This marked the largest single-day increase since 2022, sending ripples of concern throughout the global financial landscape.

Market rumors suggest that China may have begun to unload its holdings of US debt, potentially selling off as much as $50 billion in an effort to retaliate against the United States by pushing up bond yields. However, some financial experts in Taiwan believe the surge in yields could also be attributed to hedge funds unwinding "basis trades."

A basis trade involves exploiting the price difference between a commodity's spot price and its futures price. Market investors utilize this arbitrage opportunity to hedge and secure profits, impacting market dynamics.