US10Y Is Above 5%. Who’s Selling?
The Iran war is changing the risks investors face. The country data reveals major sellers, but their motivations are more complicated than a flight from America.
By Christopher Salem · 7 min read
TREASURIES / IRAN WAR / MORTGAGE RATES
- 5.11% Official 10 year yield, September 23
- +0.15 Percentage points versus September 22
- $59.2B Total foreign net buying, May through July
The 10 year Treasury yield reached 5.11% on September 23, up from 4.96% the previous day. That is Treasury’s official daily estimate, based on quotes around 3:30 p.m. Eastern, rather than a live trading quote. For borrowers, the increase adds pressure to a mortgage market already contending with expensive money. Treasury data
Who is selling, and is the Iran war responsible? Public data identifies several major sources of earlier net selling. It does not identify who drove this week’s move.
Cover: The Strait of Hormuz, March 24, 2021. NASA Johnson Space Center. Archival photograph. NASA image source · Public domain image record
The sellers we can identify
The latest Treasury country data ends in July. Across May through July, these were the five largest net sellers among separately reported countries and jurisdictions with available figures. TIC net transactions
| Country or jurisdiction | Net sales |
|---|---|
| France | $31.0 billion |
| Mainland China | $23.6 billion |
| Japan | $15.4 billion |
| Cayman Islands | $9.2 billion |
| United Arab Emirates | $6.3 billion |
All note and bond maturities, including redemptions, after subtracting purchases. Country totals combine private and official investors. They are not a list of governments selling 10 year notes. Methodology
Foreign investors overall still bought a net $59.2 billion of Treasury notes and bonds during those three months. Significant selling by some investors coexisted with stronger buying elsewhere. Treasury data
How the war changes the calculation
The energy disruption is substantial. The International Energy Agency estimated that more than 10 million barrels a day of Gulf production remained shut in during August and regional oil exports were nearly half their prewar level. IEA, September 11
Higher fuel and shipping costs can spread through the economy. Bond buyers may demand higher yields to compensate for inflation, while central banks face pressure to keep policy restrictive. War can also encourage purchases of safe assets and weaken growth, pushing yields in the other direction. Its effect is not automatic.
Institute for the Study of War
Its September 14 assessment examines contested access to Hormuz and threats to regional shipping. This is analysis of the conflict, not evidence of investor motives.
Five sellers, different pressures
France: changing the investment mix. French reported investors bought $10.3 billion of U.S. agency and corporate bonds while selling Treasuries. The Banque de France has documented the war’s pressure on energy costs, growth and public finances. Reassessing returns and risk is a plausible response, but the data does not establish that the war caused these sales. Transactions · Banque de France
China: diversification amid an energy shock. China added about 45 tonnes of gold to official reserves during the same three months. That is consistent with diversification. Exposure to disrupted Gulf oil supplies adds a reason to value liquidity, but neither the gold purchases nor the war proves where Treasury sale proceeds went. SAFE reserves · EIA
Japan: an exposed energy importer. A Bank of Japan official said in May that slightly more than 70% of Japan’s crude imports passed through Hormuz. That creates an economic vulnerability, but does not establish why Japanese investors sold Treasuries. Bank of Japan
Cayman: investors were still buying America. Cayman investors bought $92.1 billion of U.S. equities over the period and returned to net Treasury buying in July. War volatility could change fund positions or financing needs, but calling this a confirmed forced liquidation goes beyond the evidence. The Fed also warns that Cayman Treasury holdings are substantially undercounted. Transactions · Federal Reserve research
Brad Setser · September 16
Foreign money can leave Treasuries while continuing to finance American companies. Setser examines that distinction.
Original post preserved in Adam Tooze’s September 21 article.
UAE: higher oil prices do not guarantee more cash. Disrupted exports and shipping risks can offset higher prices, making liquidity and portfolio adjustments plausible. The central bank’s published reserve policy keeps currency exposure hedged to the dollar. The sales do not establish either an exit from the dollar or spending to fund the war. IEA · CBUAE policy
This week’s rise has more than one explanation
On September 23, S&P Global reported the strongest U.S. business activity growth in more than five years, alongside faster cost increases. Strong demand can sustain higher yields even without additional foreign selling. S&P Global
At his September 16 press conference, Fed Chair Kevin Warsh identified economic strength, competition for investment capital and geopolitical pressure on energy prices as explanations for rising yields. The war is part of that picture; the public record does not assign responsibility for the latest jump to particular countries. Official transcript, page 12
Warsh discusses energy inflation and the forces lifting yields. Official meeting page · Official transcript
What borrowers should take from this
A lasting improvement in oil supply could ease one source of rate pressure. It would not guarantee lower mortgage rates. Mortgage pricing also depends on mortgage bond demand, lender pricing and the borrower’s loan details.
Before deciding to lock or float: ask for the payment, upfront costs and lock expiration on today’s actual quote. Base the decision on your closing date and how much payment uncertainty your budget can absorb.
Related: What actually drives mortgage rates
As of September 23, approximately 3:30 p.m. ET. Country flows cover May through July 2026.