The truth behind the collapse of US Treasury bonds Core Conclusion The current US Treasury crisis is a liquidity shock rather than a credit collapse, and short-term risks are controllable to avoid being misled by panic emotions. Long term attention should be paid to the potential impact of US policies on the US dollar system, but the reconstruction of the global financial order still requires decades of cycles, and US bonds will remain the core asset one ️⃣ The essence of the recent turbulence in US Treasury bonds ​​ Direct inducement: high leverage "basis trading" (holding treasury bond bonds spot+short futures) was forced to close positions due to liquidity shocks, resulting in a short-term sharp decline in US bond prices. The trading logic has shifted from "safe haven assets" to concerns about US credit risk, but it has not yet reached the level of a systemic collapse. Characteristics of liquidity crisis: In the short term, it is manifested as a "triple kill" of stocks, bonds, and foreign exchange, but it is rare in history and more reflects local liquidity shocks (such as the one-day fluctuation on April 10th). The Federal Reserve can ease liquidity pressure by easing bank leverage restrictions, purchasing treasury bond bond ETFs and other tools. Key indicators: The 2-year US Treasury bonds (mainly held by foreign investors) did not significantly decline, and the long-term US Treasury bond sell-off came more from trading institutions rather than sovereign investors. The duration of foreign official holdings is only 5 years, and the selling pressure is limited (reducing holdings by 3.6 billion US dollars in April, accounting for a very low proportion). two ️⃣ Short term safety and long-term hidden concerns of US bonds Short term safety: US Treasury bonds remain the world's largest and most liquid safe haven asset, with no alternative options in the short term. The Federal Reserve has ample policy tools to quickly respond to liquidity crises (such as the experience of unlimited QE in 2020). Long term risk points: US trade protection policies (such as tariff wars) weaken international trust, and the "risk-free asset" status of the US dollar/US Treasury gradually loosens. If global de dollarization continues, long-term US Treasury bonds may face structural selling pressure, but the current conditions are not yet ripe. three ️⃣ The Truth and Pitfalls of Safe haven Assets Safe haven assets are not absolutely safe: gold, Japanese yen, US Treasury bonds, etc. will all experience severe fluctuations due to liquidity shocks during extreme crises (such as a 12% drop in gold prices in a single week in 2020). Be alert to the risk of backlash from "safe haven assets" in the later stages of a crisis (such as forced liquidation in leveraged trading). Liquidity shock law: In the early stage, funds flood into US Treasury bonds/gold, causing prices to soar. Deterioration period: The depletion of liquidity triggers a sell-off, causing both safe haven and risky assets to decline simultaneously. After policy intervention: liquidity recovers and asset prices return to fundamentals. four ️⃣ 4 suggestions for facing liquidity crisis Rationally view the volatility of US Treasury bonds: The main cause of short-term sharp declines is trading structure (deleveraging through basis trading), non US bond credit collapse, and avoiding panic redemption of fixed income products. ​​ Diversify the allocation of safe haven assets: avoid excessive reliance on a single asset (such as US Treasury bonds), gold, short-term bonds, and high rated corporate bonds can hedge extreme risks. Pay attention to policy signals: The Federal Reserve's intervention in liquidity (such as easing bank leverage) is a key indicator of stabilizing US bonds and the progress of the trade war. ​​ Long term perspective on responding to changes in the US dollar system: The conditions for the internationalization of the RMB are not yet mature (trade settlement currency is determined by buyers, and China's surplus will inevitably accumulate in US dollars). Holding US Treasury bonds remains the optimal solution for foreign exchange reserves (high liquidity, yield hedging against US dollar depreciation, gold interest free and limited capacity).