Core Viewpoint - The ongoing discussions regarding the safety of U.S. Treasury bonds have intensified, particularly following China's continuous reduction of its holdings and Moody's downgrade of the U.S. sovereign credit rating. Despite structural challenges, the likelihood of a systemic default remains low, and the status of U.S. Treasuries as a core safe asset is unlikely to change in the short term [1][5]. Group 1: U.S. Treasury Holdings and Global Capital Flow - China's holdings of U.S. Treasuries have decreased significantly from a peak of $1.3 trillion in 2013 to $765.4 billion as of March 2025, reflecting a cumulative reduction of over 40% over ten years [3]. - In contrast, Japan has increased its holdings by $49 billion to $1.18 trillion, while the UK has surpassed China to become the second-largest creditor with an increase of $290 billion [3]. - The adjustments in holdings indicate a structural reallocation of international capital within the U.S. dollar asset pool [3]. Group 2: Credit Rating and Fiscal Sustainability - Moody's downgrade of the U.S. sovereign rating to Aa1 serves as a warning regarding the sustainability of U.S. fiscal policy, with federal debt exceeding 124% of GDP and annual interest payments surpassing $1 trillion [4]. - The downgrade reflects a broader trend among major rating agencies responding to the marginal deterioration of U.S. fiscal policies, indicating effective market risk pricing mechanisms [5]. Group 3: Market Dynamics and Liquidity - Claims regarding $6.6 trillion in U.S. Treasuries maturing in June 2025 are misleading; the actual amount is $1.45 trillion across 22 bonds, with over 80% being short-term securities, highlighting the liquidity advantages of the Treasury market [7]. - As of March 2025, overseas investors held a record $9.05 trillion in U.S. Treasuries, with seven of the top ten creditor nations increasing their holdings [8]. Group 4: Central Bank Actions and Market Stability - The actions of global central banks to increase their U.S. Treasury holdings provide strong risk backing, with the Cayman Islands increasing its holdings by $37.5 billion, indicating a trend of capital flowing into the Treasury market through offshore channels [9]. - The Federal Reserve's role as the ultimate lender of last resort, holding $4.2 trillion in Treasuries, underpins the safety of U.S. debt, especially during crises [9][11]. Group 5: Future Outlook - The U.S. Treasury market may experience a unique situation of declining credit ratings while maintaining its market position, similar to high-quality corporate bonds that can still secure financing despite rating downgrades [12]. - The fundamental status of the U.S. dollar as the primary reserve currency and U.S. Treasuries as a core safe asset is unlikely to change significantly in the foreseeable future, reinforcing their foundational role in the global financial system [14].