Wall Street's conspiracy! "De-dollarization" looks more like a carefully packaged Liquidity eyewash.

Global financial media hype the panic of “China emptying US bonds”, but TIC data reveals the truth: as China's holdings drop to 759 billion USD, Belgium's holdings reach a new high of 468.4 billion, forming a perfect mirror image. The total amount of US bonds globally reaches 9.2 trillion, a second-highest record, with the real occurrence being a shift in buyers—Central Banks retreating, stablecoins and hedge funds rushing in, as capital chases a 4.5% high yield far exceeding geopolitical considerations.

Belgium's $468.4 Billion Mystery: The Perfect Cover for Offshore Custody

If you shift your gaze from Beijing to Brussels, you will discover an extremely large anomaly on the global financial map. Belgium's holdings of US Treasury bonds mysteriously soared to a record high of $468.4 billion, while the national GDP of Belgium is only $580 billion. This means that if this represents true national investment, then nearly every Belgian has lent 80% of the country's economic output to the US government, which is absolutely absurd from an economic common sense perspective.

There is only one truth: Belgium is not the ultimate buyer; it is a transit point. This is the location of Euroclear, one of the largest securities depositories in the world. To avoid potential geopolitical risks (referencing the precedent of frozen Russian assets) and to enhance transaction confidentiality, China did not actually “sell” U.S. treasury bonds, but instead conducted a strategic “offshore custody relocation.”

The data shows an almost perfect negative correlation: over the past seven quarters, each significant decrease in holdings under China's name almost mechanically corresponds to an equivalent increase in Belgium's holdings. Statistically, this cannot be a coincidence; it intuitively proves that this is not a withdrawal of funds, but rather a physical transfer of assets on the ledger. China's actual dollar exposure has remained basically unchanged, and the de-dollarization resembles a carefully orchestrated visual magic trick.

As another key offshore center, the UK's holdings surged to $877.9 billion during the same period, almost matching China's direct holdings. The Cayman Islands, a hub for hedge funds, saw its Holdings rise to $418.9 billion. This “rise and fall” is no coincidence, but rather concrete evidence of funds flowing to offshore safe havens. The institutional flaws in the TIC report lie in its ability to only track the nominal holder's country, failing to penetrate complex custodial chains, which provides a perfect data fog for the de-dollarization narrative.

Valuation Traps and the Dual Truth of Buyer Overhaul

The TIC report reflects “market value” rather than “quantity.” When the 10-year U.S. Treasury yield reaches the high point of 4.5% to 4.8% again at the beginning of 2025, the prices of outstanding bonds will shrink significantly. It is estimated that about half of the decline in China's Holdings is due to this type of “passive shrinkage” under accounting standards, rather than active selling. This valuation effect is systematically amplified in a high-interest-rate environment, creating a significant illusion of paper losses.

A more profound structural change lies in the dramatic shift in the identity of buyers. By mid-2025, foreign investors are expected to hold a total of 9.2 trillion USD in U.S. Treasury bonds, reaching a historical second-high, with a high probability of surpassing the 10 trillion mark before 2026. However, the buyer structure has completely reversed: foreign official institutions (Central Bank) have their holdings stagnating at 3.8 trillion USD, while foreign private investors' holdings have surged to 5.24 trillion USD, accounting for 57%.

Three Major Forces of New Buyers Rise

Stablecoin Issuers Become Giants: Tether (USDT) and Circle (USDC) now hold U.S. Treasury securities at a scale that ranks them as the seventh largest holders in the world, surpassing sovereign nations like Germany, South Korea, and Norway, creating a rigid demand for short-term U.S. Treasuries (T-Bills).

Japan's Life Insurance Repatriation: The Bank of Japan continues to raise interest rates, with the 10-year Japanese government bond yield exceeding 1%. Japanese life insurance institutions, due to the narrowing US-Japan interest rate differential and expensive hedging costs, have reduced their holdings from a peak of 1.06 trillion dollars.

Global Hedge Funds Go Wild: Insurance and pension funds view a 4.5% risk-free yield as a once-in-a-lifetime “locking in” opportunity, with a net inflow of up to $210.7 billion in September 2025 alone, showing a clear positive correlation of buying more as prices drop.

This shift from “administrative directives” to “market demand” has made the U.S. bond market more diversified and difficult to be shaken by a single political will. The official retreat is perfectly filled by private entry, creating a huge contrast between the political narrative of de-dollarization and market reality.

High Interest Attraction: The Cruel Math of Buying More as Prices Fall

Data reveals a brutal yet simple truth: as U.S. Treasury prices fall (yields rise), the influx of global purchasing funds increases. This is a capital feast driven by high coupons, rather than a mass exodus due to political panic. When the 10-year U.S. Treasury yield repeatedly broke above 4.5%, the market did not collapse; on the contrary, it attracted record inflows of capital.

China itself is also engaging in savvy “maneuvering.” While reducing its holdings of government bonds, China maintains stable or even increases its holdings of US agency bonds (such as Fannie Mae bonds). These bonds yield higher returns than government bonds and have implicit guarantees from the US government, indicating that the management of this Eastern power is pursuing maximum returns rather than mere political retaliation.

The repatriation of funds from Japan is not due to a “lack of trust” in the United States, but rather a result of mathematical calculations. After deducting hedging costs, holding 4.5% of U.S. Treasury bonds may not be as cost-effective as holding 1.5% of Japanese government bonds. This repatriation of funds, led by “Mrs. Watanabe” (a term for Japanese retail investors) and institutions, poses a real supply and demand challenge to the U.S. Treasury market, and its significance even surpasses the adjustments in China's Holdings.

The frenzy of global private capital buying not only fills any gaps left by official entities but also boosts the overall scale. This proves that the dominant force in the U.S. Treasury market has shifted from “Central Bank reserve management” to “yield arbitrage,” making de-dollarization appear feeble in the face of such market-driven forces.

Capital has no homeland, only yield

The data from 2025 completely shatters the bubble of “panic selling.” There is no escape, only hiding: China's “reduction” is primarily conducted through physical transfer via Belgium's Euroclear. The new dominant forces have shifted from various Central Banks to private capital, hedge funds, and stablecoin issuers, who place greater emphasis on yield rather than geopolitical factors. The law of high interest attraction continues to operate: as long as U.S. Treasury yields remain above 4%, the structural migration of global capital will not stop.

For investors, the biggest risk does not lie in whether China will sell, but in whether they will be washed out by this meticulously crafted narrative of panic. The real “smart money” has long seen through the essence of the capital behind the nationality labels: in a highly interconnected global financial system, capital has no homeland, only an eternal pursuit of returns and security. The U.S. Treasury market may no longer be dominated by a few major central banks, but it is becoming more diverse, more market-oriented, and thus harder to be shaken by a single political will.