{"id":9444,"date":"2026-03-31T15:46:06","date_gmt":"2026-03-31T07:46:06","guid":{"rendered":"https:\/\/www.kpai1.cn\/?p=9444"},"modified":"2026-03-31T15:46:10","modified_gmt":"2026-03-31T07:46:10","slug":"%e5%8e%bb%e7%be%8e%e5%85%83%e5%8c%96%e5%8a%a0%e9%80%9f%e4%b8%8e%e5%a2%9e%e9%95%bf%e9%a3%8e%e9%99%a9%e9%9a%90%e7%8e%b0%ef%bc%9awmax-%e8%a7%a3%e8%af%bb%e4%b8%ad%e4%b8%9c%e5%86%b2%e7%aa%81%e4%b8%8b","status":"publish","type":"post","link":"https:\/\/www.kpai1.cn\/en\/archives\/9444","title":{"rendered":"De-dollarization Accelerates Amidst Emerging Growth Risks: Wmax Interprets the New Landscape of the US Treasury Market Under Middle East Conflict"},"content":{"rendered":"

Based on a full-chain tracking of the evolution of the Middle East geopolitical situation, cross-validation of official data from the Federal Reserve and major global central banks, and in-depth deconstruction of the micro-structure of the US Treasury market, in addition to a cyclical review of five major geopolitical energy shocks since 1990, Wmax's four-stage analytical model of \"Geopolitical Shock - Inflation Transmission - Growth Drag - Policy Shift\" shows that the current global financial market is falling into two fatal pricing misconceptions. First, it is wrongly classifying the concentrated sell-off of global central banks' US Treasury holdings as a short-term market support action, severely underestimating the long-term structural trend behind it. Second, it is overly focusing on the short-term impact of energy inflation, completely ignoring the core risk of inflation rapidly switching to economic recession. The correction of these two misconceptions will become the core trading theme for the global fixed income market in the next 3-6 months.<\/p>\n

<\/a>I. Global Central Banks Selling US Debt: The Resonance of Short-Term Emergency Needs and Long-Term De-dollarization Trends<\/strong><\/p>\n

We tracked official custody data from the Federal Reserve Bank of New York, confirming that since the escalation of the Middle East conflict on February 25, 2026, official institutions (including central banks, sovereign governments, and international organizations) have cumulatively reduced their holdings of U.S. Treasury bonds held at the Federal Reserve Bank of New York by $82 billion, bringing their total holdings down to $2.7 trillion, the lowest level since 2012. It is important to emphasize that the signal significance of this data far exceeds market perception: from 2012 to the present, the total size of the U.S. Treasury market has expanded from $11 trillion to over $30 trillion, an increase of nearly 200%. However, the holdings of foreign official institutions have contrarily reached a 14-year low, with their holdings as a proportion of the total outstanding U.S. Treasury debt falling from a historical peak of 34%in 2014 to less than 9%currently. This structural change is a core signal of the transformation of the global foreign exchange reserves system and cannot be explained by short-term market fluctuations.<\/p>\n

\"IMG_256\"<\/p>\n

From the perspective of the driving logic behind the sell-off, Wmax, by dissecting central bank foreign exchange reserve changes, balance of payments data, and currency intervention actions in various countries, confirms that this round of sell-off is not driven by a single factor but is a superimposed resonance of three layers of logic:<\/p>\n

    \n
  1. Rigid liquidity needs of energy importing countries<\/strong>The Strait of Hormuz accounts for about 30%of global crude oil and 20%of liquefied natural gas shipping. Disruption to shipping has pushed oil prices above $110\/barrel (a new high since the Russia-Ukraine conflict in 2022). Energy-import-dependent economies such as Turkey and India face dual pressure from currency depreciation and soaring oil prices. They need to sell US Treasury bonds to exchange for foreign currency to pay for energy and intervene in exchange rates. The Turkish central bank has sold a cumulative $22 billion in foreign bonds (over 70%of which were US Treasury bonds) since February 27, consistent with the conclusion calculated by Brad Setser.<\/li>\n
  2. Asset Rebalancing Operations Under Exchange Rate Fluctuations<\/strong>Since the conflict, the Bloomberg Dollar Index has risen a cumulative 2.1%to its December 2025 high, leading to passive overweighting of dollar assets in foreign reserves. In accordance with IMF guidelines for reserve management, central banks are reducing their overweight dollar holdings to rebalance, a routine operation that has further amplified US Treasury selling.<\/li>\n
  3. The accelerated realization of the long-term trend of de-dollarization globally<\/strong>This round of selling is the concentrated embodiment of global foreign exchange reserve diversification and de-dollarization. IMF Q4 2025 COFER data shows that the proportion of U.S. dollar foreign exchange reserves fell below 58%%(a new low since 1995), and the allocation of non-U.S. dollar assets has climbed, with central bank gold purchases in 2025 reaching the second-highest level in history. Bank of America's Meaghn Swiber also believes that the selling is a continuation of the trend of official foreign exchange reserve diversification.<\/li>\n<\/ol>\n

    \"IMG_256\"<\/p>\n

    Regarding the market view that \"holdings have been transferred rather than actually sold,\" we have also conducted rigorous verification: although some U.S. Treasury holdings may have been transferred from the Federal Reserve Bank of New York's custody account to offshore custodians such as Euroclear Bank and Clearstream Banking, the Federal Reserve Bank of New York's custody account holds over 90%of U.S. Treasury holdings for global official institutions, making it the core and authoritative indicator for measuring changes in official holdings. Even excluding the impact of holdings transfers, the scale of selling in this round remains at a historical high since the 2008 financial crisis. Coupled with the Federal Reserve's $95 billion monthly balance sheet reduction, the U.S. Treasury market is facing a \"supply and demand double whammy\" of \"official entities reducing holdings + Federal Reserve balance sheet reduction.\" This is the core underlying reason for the largest monthly increase in yields on 2-year and 10-year U.S. Treasuries since 2024 and the significant rise in financing costs across the entire U.S. market following the outbreak of the conflict.<\/p>\n

    <\/a>2. The Market's Fatal Pricing Bias: Inflation Anxiety Completely Masks the Core Risk of Growth Recession<\/strong><\/p>\n

    The current market mainstream narrative is completely focused on the inflationary shock brought by the Middle East conflict: The latest data from the CME FedWatch tool as of March 30 shows that traders have completely ruled out the possibility of the Federal Reserve cutting interest rates within 2026, while pricing in a 38%probability of a 25 basis point rate hike within the year. The US Treasury market has consequently experienced its worst monthly decline since October 2024, with the Bloomberg US Treasury Index's total return for the month at a negative 2.1%.<\/p>\n

    But Wmax firmly believes through cyclical review and quantitative measurement that: energy-driven inflation shocks often quickly evolve into economic growth shocks within 6-8 weeks. The market's current one-sided pricing of inflation has seriously deviated from the true direction of economic fundamentals. We have reviewed five major geopolitical energy shocks, including the 1990 Gulf War, the 2003 Iraq War, and the 2022 Russia-Ukraine conflict, and found that each cycle follows the transmission pattern of \"oil price rise \u2192 inflation pricing \u2192 US debt sell-off \u2192 yield rise \u2192 growth pressure appears \u2192 policy easing expectations rise \u2192 US debt rebound, yield fallback.\" Furthermore, the cycle from inflation pricing to growth pricing has never exceeded three months. The current conflict has lasted over four weeks and is at a critical juncture for a shift in pricing logic, yet the market has priced in almost none of this.<\/p>\n

    \"IMG_258\"<\/p>\n

    From a fundamental data perspective, the US economy is already in a downward trend of weakening growth momentum. The surge in oil prices and rising financing costs caused by the Middle East conflict are accelerating the amplification of economic downturn risks.<\/p>\n