Why China just told its banks to dump US Treasury bonds

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Bond yields in the United States have risen sharply since just five years ago. Lenders and bond investors have paper losses of nearly 20% on its US Treasury portfolios since that time. This poses serious challenges for banks, with large US Treasury holdings. They need their reserves to hold value over time, to capitalize the institution, and to collateralize new loans. China's banking regulators have instructed their largest banks to cease new purchases of US government debt, and to strongly consider selling existing holdings. The Chinese government itself has slashed its holdings of US Treasury bonds, which are at the lowest level in eighteen years. Closing scene, Taicang, Jiangsu Resources and links: China urges banks to curb US Treasuries exposure, Bloomberg News reports https://www.reuters.com/world/asia-pacific/china-urges-banks-curb-us-treasuries-exposure-bloomberg-news-reports-2026-02-09/ China Urges Banks to Curb Exposure to US Treasuries https://www.bloomberg.com/news/articles/2026-02-09/china-urges-banks-to-limit-holdings-of-us-treasuries-citing-market-volatility Treasuries Fall as China Banks Asked to Limit Bond Holdings https://finance.yahoo.com/news/treasuries-fall-china-banks-asked-081715745.html Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity https://fred.stlouisfed.org/series/DGS10 Trading View, US Government Bonds 10 YR Yield https://www.tradingview.com/symbols/TVC-US10Y/?timeframe=60M