Every New Buyer of America's Debt Is Weaker and More Expensive Than the Last

The September 15 auction of twenty-year Treasury bonds read like a seating chart for a room being quietly cleared. Indirect bidders — the category that catches foreign central banks and other offshore money, bidding through a middleman — took 52.5 percent of the issue, a record low since the Treasury reintroduced the twenty-year in 2020. Direct bidders — money bidding for its own account rather than through a dealer — took a record 30.7 percent. The bond priced at 5.42 percent, and the two-basis-point gap between that yield and the level traders expected going in, the auction's tail, was the widest since 2024 ^[1]. Days before the sale, Treasury Secretary Scott Bessent had told Congress that the debt auctions were going well ^[1]. On the day of the sale, he went further.

Since President Trump has come in, it has been the best-performing bond market in the developed world. — Scott Bessent

The market so described had, that same day, sold a twenty-year bond at the highest yield in that instrument's history. The exits behind that print did not start in September, and no one declared them. The clock started in May 2025, when Moody's took away the United States' last triple-A rating; by that July the Treasury was already expanding a program of buying back its own bonds ^[2][3]. What the traditional holders have done since mostly amounts to paperwork. Norway's sovereign wealth fund has proposed cutting the government-bond share of its fixed-income benchmark from 70 to 50 percent, which would take its U.S. government-bond weighting from 34.1 to 21.9 percent, a proposal that arrived as the federal debt passed $40 trillion ^[4]. ABP, the Dutch pension giant, reports its Treasury holdings down from about €29 billion at the end of 2024 to €19 billion this September ^[5]. Japan's numbers are larger and its reasons closer to home. The country is the largest foreign holder of Treasuries, at roughly $1.1 trillion, and its GPIF, the world's biggest pension fund, could sell up to $62 billion of them without a formal allocation review. The fund's reasons are domestic: the Bank of Japan's rate hikes have lifted the ten-year Japanese government bond yield to 3 percent for the first time since 1996 ^[6]. The central banks, for their part, have been moving metal. France brought 129 tons of gold home from the New York Fed's vaults to Paris, the Netherlands shifted part of its reserves as well, and the dollar's share of global central-bank reserves ended 2025 at 56 percent ^[7]. The Danish pension industry, for its part, rejects the political reading.

There is certainly no weaponisation of capital. It is not the job of our sector to do that. — Insurance and Pensions Denmark

That denial fits the pattern: benchmark reviews, quarterly filings, tonnage on a manifest — the paperwork of risk officers, not the communiqués of a bloc. But a repricing empties a room just as fast as a boycott would, and what the denials leave unexplained is the other side of the trade. Across the same sixteen months, Washington's answer has not been a campaign to win the old buyers back. It has been a ladder of substitutes, each rung weaker and more expensive than the one above it, each standing closer to the issuer. The first rung is the money that will come, at a price. It arrived almost with the downgrade itself: in the weeks after Moody's cut, money managers pulled $3.9 billion from Treasury funds in a single month and moved $10 billion into investment-grade corporate bonds, then $13 billion more the month after ^[2]. BlackRock's read on the rotation was brisk.

Credit has become a clear choice for quality. — BlackRock

By September the rotation had reached the auction podium, where the own-account share of the bidding hit its record. This month, with the ten-year yield near 4.9 percent, its highest since 2007, and the thirty-year at 5.33 percent, strategists at Allspring and MacKay Shields were calling Treasuries a value zone — proof the rung holds, at a price ^[8]. It holds best at the short end: Amundi, Europe's largest asset manager, is buying two-year Treasuries above 4.5 percent as a hedge against a slowdown ^[9], and European wealth managers are still shipping money into the United States, into equities now rather than bonds ^[10]. The ten- and thirty-year auctions the week before the twenty-year drew steadier demand ^[1]. The weak spot is the long end, the tenor a government financing $40 trillion has to keep visiting. And the crack is in the same flows: this is money that chose corporate bonds over the sovereign once already, and stays only while the spread pays it to. The second rung is stranger, because the Treasury named it itself. The department's view, put forward in late August, treats a cryptocurrency-market recovery as the only remaining near-term lever on demand for U.S. debt, with stablecoins — crypto tokens pegged to the dollar — cast as the primary replacement for the traditional sovereign buyers, and it named Japan and China directly ^[11]. The projection is a stablecoin market of $3 trillion by 2030, its issuers as trillion-dollar buyers of government debt. In the first half of this year, USDT and USDC, the two flagship coins, each shrank by nearly $3 billion amid a crypto slump ^[12]. Their growth rides on Bitcoin's price, and only about 0.7 percent of stablecoin supply is used for actual payments ^[11]. Tether's answer to its own shrinking numbers reached for the long term.

The current pause in stablecoin growth should not be mistaken for a ceiling on Treasury demand. — Tether

The next rung down is the issuer itself, and the mechanism there is worth slowing down for. The Treasury expanded its program of buying back its own bonds in the summer of 2025 and has since tripled the operations ^[3][13]. Bessent described the purpose himself when he expanded the program.

And part of it is signaling here, and to show that we believe that the yields don’t reflect the underlying fundamentals. — Scott Bessent

By this month the program was missing its own purchase targets, and the critique had sharpened into something worse: that open signaling advertises official anxiety while creating expectations the Treasury cannot meet ^[14][13]. Analysts at BNP Paribas put the eventual scale above $1 trillion, and the same design presses on everyone else in the queue: the Treasury has been encouraging companies to issue shorter-dated debt, so that private borrowers compete less with their government for long-term money ^[15]. The balance sheet gets marked up along the way. The administration has proposed revaluing the government's 260 million ounces of gold off the $42-an-ounce book price it has carried since the 1970s and toward a market price above $5,000 an ounce ^[16][7]. The symmetry is hard to miss: in the same season that allied central banks were fetching their gold out of New York, Washington was marking its own up. Deeper into the issuer's rung sits the one tool with a wartime pedigree. Yield-curve control — the government holding its long-term borrowing costs at a fixed level by standing in the bond market as a buyer of unlimited size, the device last used to help finance the 1940s — is now discussed openly, with the debt at $40 trillion and interest payments closing on a fifth of all federal receipts. The 1940s version delivered strong equity markets and high inflation, which was good for anyone holding assets and bad for anyone living on wages ^[17]. Deepest in that rung is the central bank itself. The open speculation in Washington is that the administration may eventually ask the Federal Reserve to buy government debt outright, a step Fed Chair Warsh is expected to resist ^[13]. Markets, for now, expect rate hikes to run into 2027 ^[14]. And the brake that would normally stop a slide like this has been half-disconnected already. Interest on the debt now runs ahead of the entire defense budget ^[18]. The mechanism is not exotic: every dollar of interest the government pays is income to whoever holds the bond, and as those payments grow they recycle federal money back into the private economy, softening the squeeze a rate hike is supposed to create. The inflation the hikes are aimed at is supply-driven, born of energy prices and tariffs, the kind rates cannot fix. One line of analysis now holds that the assumptions behind four decades of monetary policy may simply no longer apply ^[19]. Bessent's own defense of the government's position has lately come in casino terms.

I have asymmetric information. I am the house now. — Scott Bessent

A house, at a casino, is the one party that ends up taking the other side of every bet on the floor. The last rung of the ladder is the issuer's own bidding desk.