According to APP reports, the latest official data shows a significant decline in the amount of U.S. Treasury securities held by foreign official institutions at the Federal Reserve Bank of New York, reaching a low level in recent years. At the same time, yields on both two-year and ten-year U.S. Treasury bonds saw their largest increases in recent months, with borrowing costs rising across the board. Global central banks are selling U.S. Treasury bonds at the fastest pace in over a decade to stabilize their domestic economies and exchange rates. This action, coupled with the need for foreign exchange reserve management, has further pressured the already strained U.S. Treasury market, and investor concerns about inflation driven by the Iranian conflict have intensified significantly.

This sell-off was primarily driven by the surge in energy prices triggered by the conflict with Iran. Brent crude oil prices have risen by over 50% since the conflict escalated, briefly breaking through the $117/barrel mark. The risk of disruption to shipping through the Strait of Hormuz has directly exacerbated the global energy supply shortage. Central banks worldwide have adjusted their reserve structures, reducing their holdings of US Treasury bonds to hedge against exchange rate volatility and inflationary pressures. From a macroeconomic perspective, the fluctuating US dollar index and the uncertainty surrounding Federal Reserve policy expectations have also accelerated this diversification process. Technically, the US Treasury yield curve steepened significantly this month, with both 2-year and 10-year maturities recording their largest monthly increases this year, indicating that the market has fully priced in rising borrowing costs.

To more clearly illustrate the difference in performance between US Treasury yields and energy assets, the following table compares key indicators in recent times:

Data shows that the sharp fluctuations in energy prices have been significantly transmitted to the interest rate market, with the rise in US Treasury yields exceeding some market expectations, highlighting the strong influence of geopolitical risks on global asset pricing.

Further analysis reveals that the long-standing trend of global reserve management institutions diversifying their dollar asset allocations has accelerated in this round of conflicts. The status of US Treasury bonds as the world's primary reserve asset is facing diversification challenges, with central banks in emerging economies such as major Asian countries reducing their exposure to single assets by increasing gold holdings and adjusting their foreign exchange baskets. Meghan Swiber, US interest rate strategist at Bank of America, recently commented on this topic, stating, "We believe that US macroeconomic risks are likely limited unless there is a significant surge in oil prices," while also pointing out that geopolitical factors have led to a temporary tightening of liquidity in the US Treasury market, requiring investors to reassess the inflation path. These factors combined have put pressure on the US Treasury market at high levels, while also providing a window of opportunity for global central banks to adjust their reserve structures.
Editor's Summary : The surge in energy prices triggered by the Iranian conflict and the global central bank's reduction of its holdings of US Treasury bonds have jointly shaped the current market landscape. Geopolitical risks are providing a direct impetus for rising yields, but the long-term trend of diversification in dollar asset allocation also reflects a profound shift in reserve management philosophy. Investors need to closely monitor the progress of the conflict, oil price trends, and policy statements from major central banks.