As of October 3rd, the United States' national debt has finally surpassed $31 trillion.

The previous figure was $30.7 trillion, marking the first time in U.S. history that the outstanding national debt has exceeded $31 trillion.

In the past two decades, U.S. debt has undergone two significant inflationary periods.

One was after the 2008 subprime mortgage crisis, with three consecutive rounds of quantitative easing (QE), leading to a substantial increase in the total amount of U.S. debt;

The second time was after the COVID-19 pandemic in 2020, when the U.S. financial markets plummeted, with the stock market dropping nearly 30%, and international crude oil prices even falling into negative territory, causing the Federal Reserve to panic and issue a large amount of debt, rapidly increasing the total amount of U.S. debt.

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Now, while the Federal Reserve continues to raise interest rates, claiming to adopt a monetary tightening policy, at the same time, the United States has passed several bills in succession, using the development of industries such as chips and new energy as a pretext for huge subsidies. In this process, the total amount of U.S. debt has increased again.

Issuing debt seems to have become an addictive drug for the United States, becoming increasingly difficult to stop, and it is global investors who are footing the bill for the United States.

However, at the same time, the yield on U.S. debt has fallen in recent days, with the latest data showing that the yield on 10-year Treasury bonds has returned to 3.6%.On the evening of September 29th Beijing time, the yield on U.S. Treasury bonds rose rapidly, with the 10-year U.S. Treasury bond yield breaking through 4%. In the last few days, as the U.S. Dollar Index continues to fall, the yield on U.S. Treasury bonds has also followed downward, resulting in a significant decline.

The significant increase in yields in the previous period indicates continuous selling.

China also sold a large amount of U.S. Treasury bonds before this, starting from the end of last year, and sold nearly $115 billion net in seven consecutive months.

However, in the latest monthly data, China's U.S. Treasury bond balance not only did not decrease but increased by $2.2 billion against the trend. Why did China start buying U.S. Treasury bonds again?

First, let's look at the detailed data. Among the increased $2.2 billion, the holdings of long-term Treasury bonds increased by $900 million, and short-term Treasury bonds of less than one year increased by $134 million.

There are two possible reasons for the monthly sequential increase.

The first possibility is that as the price of U.S. Treasury bonds continues to fall, China has consciously replenished part of its positions.

The other possibility is that the decline in U.S. Treasury bond yields has led to an increase in the valuation of the held U.S. Treasury bonds, which is not an active increase in China's positions.

We can see from the monthly transaction data that China sold $7.1 billion worth of long-term U.S. Treasury bonds. However, at that time, the yield on 10-year U.S. Treasury bonds fell from 3.1% to 2.75%, a significant decrease, which means the price of 10-year Treasury bonds rose slightly, causing the balance of the U.S. Treasury bonds we hold to increase instead.Moreover, in the past several months, China has been continuously selling off US Treasury bonds, with each month exceeding 10 billion, so this time increasing by 2.2 billion also seems quite strange. If there is a need to increase holdings, it would not be by such a small margin.

Therefore, China will continue to reduce its holdings and at least there will not be a significant increase.