The dollar itself is one of the mainstream currencies in the world. For any country and region that wants to engage in international trade, it is very important to hold a certain amount of US dollars, which is also the main reason why many countries hold corresponding US debts. After the downturn of American economy, many countries will choose to sell American debt and reduce their corresponding foreign exchange reserves in order to further avoid the impact of American economic problems on their own economic development, because the currency liquidity of the US dollar is very strong.
This is because the risk of holding American debt has become higher.
Among the bonds of various countries, the holding risk of American debt is actually relatively low, which is also considered as a high-quality asset. Due to the high inflation in the United States, the economic development of the United States has also been affected by the COVID-19 epidemic, which will directly lead to the high risk of holding American debt. In this case, many countries, including China, will choose to sell American debt one after another.
The holding income of American debt will be lower and lower.
In addition to the holding risk of the US debt itself, because the Fed is raising interest rates, it will also shrink its table. Although this series of operations will increase the interest rate of the US dollar, it will also lead to a decrease in the income of the US debt. With the further contraction of global economy and trade, many countries actually don't need so much foreign exchange reserves at all, so many countries will sell some American debts according to their actual import and export situation. This kind of behavior is actually normal.
In addition, because there are many uncertainties in the US dollar, holding a large amount of US debt will not only affect the economic development of a country or region, but also lead to a further reduction in the yield of US debt. Holding a large amount of American debt does not mean that it is a good thing.