The Great Treasury Exodus: Will the US Fall?

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Foreign countries are retreating from US debt markets, presumably because they’ve finally realized that the American fiscal system is a glittering, crumbling palace of debt, built on the fragile foundations of fiscal irresponsibility and the delusions of grandeur.

This sustained retreat by major foreign holders points to a broader erosion of confidence in US fiscal discipline and long-term debt sustainability. This trend has major implications for global capital costs, liquidity conditions, and risk asset valuations-though one suspects the US will simply print more money and call it a day.

Foreign Demand for US Debt Fractures as Some Exit and Others Double Down

In a latest post on X (formerly Twitter), The Kobeissi Letter, highlighted that over the past year, Denmark reduced its US Treasury holdings by $4 billion, a 30% decline.

“Denmark’s US Treasury holdings are at record lows: The value of US Treasuries held by Denmark is down to ~$9 billion, the lowest in 14 years…Denmark is quietly exiting US debt market,” the post read.

Since peaking in 2016, Danish holdings have dropped by more than half. The country now accounts for less than 1% of Europe’s total holdings of US government securities, valued at $3.6 trillion. One wonders if Denmark is planning to start its own currency, perhaps named the “Daneo,” to replace the dollar’s crumbling prestige.

Furthermore, Danish pension fund AkademikerPension has stated it will fully divest from US Treasuries worth around $100 million by the end of the month. The fund’s Investment Director, Anders Schelde, noted that the “decision is rooted in the poor US government finances.” A sentiment so profound it could be etched onto a marble tablet and displayed in the US Treasury’s lobby.

🚨🚨🚨!!! Danish pension fund to sell and exit US Treasuries !!!🚨🚨🚨

This could lead to a sell off from other holders. Holders that have been turned on, threatened and attacked politically.

This could be extremely, extremely damaging to the United States.

– Bricktop_NAFO (@Bricktop_NAFO) January 20, 2026

Nonetheless, while speaking to reporters at the World Economic Forum in Davos, Switzerland. US Treasury Secretary Scott Bessent on Wednesday dismissed the concerns.

“Denmark’s investment in US Treasury bonds, like Denmark itself, is irrelevant,” he said. “That is less than $100 million. They’ve been selling Treasurys for years, I’m not concerned at all.”

While Denmark’s move may not concern Bessent on its own, it is far from an isolated case. According to data released by the US Department of the Treasury, China’s US Treasury holdings have dropped to a 17-year low.

China’s holdings fell to $682.6 billion in November, down from $688.7 billion in October, marking the lowest level since 2008. A figure so low it makes one question whether China has finally discovered the concept of “prudence” or is simply waiting for the dollar to collapse so it can buy the remnants at a discount.

“And if they continue like this, they’ll be below 500bn soon, below Belgium and Luxembourg haha. China is insulating itself from the incoming crash in the West,” a market watcher wrote.

India has followed a similar path, with its US Treasury holdings dropping to around $190 billion by the end of October 2025. Taken together, these actions point to a fundamental reassessment of US credit risk among major foreign holders. One might say it’s a “reassessment” of the US’s ability to manage its finances, which, let’s be honest, is about as reliable as a teetering stack of Jenga blocks.

The scale and persistence of these reductions suggest more than routine portfolio rebalancing. Instead, they reflect growing concern over America’s fiscal sustainability and the risk of policy-driven deterioration in credit quality. A concern so palpable it could be bottled and sold as “The Scent of Fiscal Collapse.”

There is, however, a counterbalance. Japan and the UK have increased their holdings. Japan’s exposure rose by $2.6 billion to $1.2 trillion. In addition, the UK expanded its holdings by $10.6 billion to $888.5 billion. A testament to the enduring charm of the US dollar, or perhaps a desperate attempt to keep the party going until the last possible moment.

Liquidity Cascade and Implications for Crypto

Nevertheless, an analyst has warned of a looming “big storm” as countries accelerate their sell-off of US Treasuries. The post explained that treasury liquidations create ripple effects across global markets.

US Treasuries play a central role in the global financial system. When large volumes of Treasuries are sold, bond prices tend to fall, and yields rise, increasing borrowing costs across the economy. A situation akin to a crowded room where everyone suddenly decides to leave, causing a stampede.

Higher yields can lead to tighter financial conditions, as more expensive funding discourages risk-taking and reduces available liquidity. Analysts note that in such environments, assets that depend heavily on abundant liquidity, including equities and cryptocurrencies, may come under pressure. A reminder that even the most speculative investments are not immune to the laws of economic gravity.

Furthermore, US Treasuries are the main collateral for banks, funds, and market makers. Falling Treasury values impair collateral, pushing financial institutions to lower risk exposure. This, in turn, triggers selling pressure across many asset classes. A chain reaction so predictable it could be scripted for a Hollywood blockbuster.

“Stocks and crypto do not live in a vacuum. They are built on cheap funding + easy liquidity. So when bonds get hit, it is not ‘boring bond stuff.’ It is collateral getting weaker,” Wimar stated.

The analyst outlined a sequence of how markets could respond. Bonds typically move first. Equity markets tend to react later, reflecting changes in funding conditions and investor risk appetite.

Cryptocurrencies, which are highly sensitive to liquidity and leverage, often experience the sharpest price swings as risk aversion sets in. This chain reaction means that disruptions in the Treasury market can threaten the entire risk asset space. A scenario so dramatic it would make a Shakespearean tragedy seem like a lighthearted comedy.

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2026-01-22 13:51