Core Viewpoint - The article analyzes the potential risks associated with foreign countries selling U.S. Treasury bonds (T-bonds) in response to tariffs, emphasizing that such actions are unlikely to lead to a significant increase in T-bond yields due to various structural factors in the market [2][26]. Group 1: U.S. Treasury Bond Structure - The maturity structure of U.S. Treasury bonds is categorized into short-term (under 1 year), medium-term (1-10 years), and long-term (over 10 years), with short-term bonds accounting for 21.5%, medium-term for 51.8%, and long-term for 17.2% as of March 2025 [4]. - In terms of issuance, over 80% of new T-bonds issued in 2023 have been short-term, reflecting the government's strategy to manage debt costs based on interest rate conditions [4]. Group 2: Investor Composition - As of December 2024, foreign investors, including foreign institutions and central banks, hold 33.0% of U.S. Treasury bonds, followed by mutual funds at 19.3%, the Federal Reserve at 14.7%, individual investors at 10.3%, and banks at 8.6% [6]. - Among foreign investors, central banks account for approximately 43%, with Japan, the UK, and China being the largest holders [6]. Group 3: Maturity Distribution and Repayment Pressure - The maturity distribution indicates that due to anticipated interest rate cuts by the Federal Reserve, the highest volume of T-bonds maturing will occur in the next 2-3 months, with a total maturity of $12 trillion from January to May 2023, compared to $11.5 trillion in the same period last year [12]. - The U.S. government primarily rolls over maturing debt, but high debt levels and interest rates could create repayment pressures, with net interest payments projected to reach 3.1% of GDP in 2024, nearing historical highs [15]. Group 4: Trading Volume and Foreign Selling Review - Since the Federal Reserve's interest rate hikes in 2022, the average daily trading volume of T-bonds has increased significantly, reaching $1.36 trillion, although the turnover rate has not increased proportionately [17]. - Historical analysis shows that while China has reduced its T-bond holdings from a peak of $1.3 trillion to under $800 billion by March 2025, Japan has experienced periods of reduction but overall maintains a rising trend in T-bond holdings [23][24]. Group 5: Conclusion on Foreign Selling Impact - The article concludes that foreign selling of U.S. Treasury bonds is unlikely to cause significant yield increases due to the large market size, the limited speed of potential selling, and the historical resilience of T-bond yields to foreign selling actions [26]. - Key factors include the improbability of a prolonged government shutdown due to debt ceiling issues, the active trading environment of T-bonds, and the limited alternatives for foreign reserves [27].

Group 1: Macro Analysis - The report analyzes the risk of a sell-off in US Treasury bonds, indicating that the scale of US Treasury holdings and daily trading volume is significantly larger than that of any other country, suggesting that no single nation can manipulate the US Treasury market [2] - Historical data shows that reductions in overseas holdings have less impact on US Treasury trends compared to fundamental variables, but a coordinated sell-off by multiple countries in response to tariffs could significantly disrupt the US Treasury market and global financial markets [2] Group 2: Fixed Income - In April, the broad fiscal revenue showed a slight positive change with a year-on-year increase of 2.7%, while fiscal expenditure grew by 12.9% year-on-year, indicating an acceleration in spending [2] - Cumulatively, from January to April, broad fiscal revenue decreased by 1.3% year-on-year, while broad fiscal expenditure increased by 7.2% [2] Group 3: Food and Beverage Industry - Investment recommendations for the liquor sector emphasize strengthening core capabilities and highlight three main lines: leading brands with increasing market share, high-certainty regional brands, and resilient recovery stocks [3] - For consumer products, the report suggests focusing on opportunities in beer and beverages, with a particular emphasis on companies benefiting from policy changes or recovery improvements, as well as those with high growth potential [3] Group 4: Pharmaceutical Industry - The report discusses the collaboration between Sanofi and Pfizer regarding the PD-1/VEGF bispecific antibody SSGJ-707, which includes a non-refundable upfront payment of $1.25 billion and potential milestone payments up to $4.8 billion [6] - Sanofi retains rights for development and commercialization in mainland China, while Pfizer will have an option for commercialization in that region based on agreed financial terms [6]

Core Viewpoint - The downgrade of the U.S. credit rating by Moody's has raised concerns among Hong Kong fund managers about potential forced selling of U.S. Treasury bonds, particularly under the strict regulations of the Mandatory Provident Fund (MPF) system [1][3][4] Group 1: Impact of Credit Rating Downgrade - Following Moody's downgrade, only Japan's R&I maintains a AAA rating for the U.S., which could lead to significant selling pressure on U.S. Treasuries held by Hong Kong funds [3][4] - The total assets of MPF funds that could hold U.S. Treasuries amount to approximately HKD 484 billion (around USD 61.8 billion) by the end of 2024 [3] - The Hong Kong Investment Funds Association has expressed concerns to regulatory bodies, suggesting that exceptions should be made for U.S. Treasuries even if their rating falls below AAA [3][4] Group 2: Market Reactions and Predictions - There has been a notable increase in short positions on U.S. Treasuries, with traders betting on a rise in the 10-year Treasury yield to 5%, reflecting growing concerns over U.S. government debt and deficits [1][5] - Major Wall Street strategists, including those from Goldman Sachs and JPMorgan, are raising their yield forecasts due to the ongoing fiscal challenges posed by the Trump tax cuts [5][6] - Historical data indicates that downgrades in sovereign ratings typically have a more pronounced short-term negative impact on U.S. equities, while the long-term effects on Treasury yields are less significant [5][6] Group 3: Broader Economic Implications - The ongoing discussions around the Trump tax cuts and their potential passage could exacerbate the U.S. fiscal situation, leading to increased market volatility regarding long-term Treasury yields [6] - Concerns about potential retaliatory actions from foreign nations, such as selling U.S. Treasuries in response to tariffs, could pose systemic risks to the Treasury market, although historical trends suggest that such actions have limited impact [6]

Macro Analysis - The risk of foreign countries selling U.S. Treasuries is a concern, especially in light of recent tariff announcements by Trump, but the actual impact may be limited due to the scale of the U.S. Treasury market[1] - The total outstanding U.S. Treasuries and daily trading volume are significantly larger than the holdings of any single foreign country, indicating that no single nation can manipulate the market[1] - Historical data shows that foreign selling has less impact on Treasury yields compared to fundamental variables[1] Treasury Structure - As of March 2025, the maturity structure of U.S. Treasuries is as follows: short-term (1 year or less) at 21.5%, medium-term (1-10 years) at 51.8%, and long-term (over 10 years) at 17.2%[2] - Foreign investors hold 33.0% of U.S. Treasuries, with the largest holders being Japan (12.5%), the UK (8.6%), and China (8.5%) as of March 2025[2] Maturity and Repayment Pressure - The total maturity of U.S. Treasuries reached $12 trillion from January to May 2025, compared to $11.5 trillion in the same period last year, indicating a rolling peak in maturity pressure[3] - The U.S. government is currently at its statutory debt ceiling, limiting new issuances until Congress acts, which could increase future maturity pressure if the ceiling is raised[3] Trading Volume and Foreign Selling - The average daily trading volume of U.S. Treasuries reached $1.36 trillion as of April 2025, exceeding the holdings of any single foreign country, such as Japan, which holds approximately $1.13 trillion[6] - Historical trends show that reductions in foreign holdings, such as China's decrease from $1.3 trillion in 2015 to under $800 billion by March 2025, have not led to significant deviations in Treasury yields from fundamental trends[7] Conclusion on Foreign Selling Impact - If tariffs lead to foreign countries reducing their Treasury holdings, it is unlikely to cause sustained increases in Treasury yields due to several factors, including the vast size of the Treasury market and limited alternative reserve assets[8] - A coordinated and aggressive sell-off by multiple countries could pose a significant risk to the Treasury market and global financial stability, but this scenario is considered less likely[8]

Core Viewpoint - Japanese Finance Minister Kato Katsunobu retracted his earlier statement suggesting that Japan could use its holdings of U.S. Treasury bonds as leverage in trade negotiations with the U.S. [1][3] Group 1: Statements and Clarifications - Kato emphasized that Japan's holding of U.S. Treasury bonds, amounting to nearly $1.13 trillion, is primarily for ensuring liquidity and stabilizing the yen, not as a bargaining chip in negotiations [3][4] - His initial comments were made during a time when Japan was engaged in tariff negotiations with the U.S., which raised concerns about Japan's cautious approach to its U.S. bond holdings [3][5] Group 2: Market Reactions and Implications - Analysts noted that even the suggestion of using U.S. Treasury bonds as a negotiation tool could increase volatility in the U.S. bond market, especially following recent trade tensions [5][7] - The potential for Japan or other major holders to sell U.S. bonds could lead to higher U.S. interest rates, complicating the financing of the U.S. budget deficit and impacting borrowers [7][8] - Historical context was provided, referencing former Prime Minister Hashimoto Ryutaro's similar comments about selling U.S. bonds, which led to market turmoil and a retraction of his statements [8]

Core Viewpoint - Japan's significant holdings of U.S. Treasury bonds may serve as a bargaining chip in trade negotiations with the U.S., as stated by Japan's Finance Minister, Taro Kato [1][2] Group 1: Japan's Position on U.S. Treasury Bonds - Japan holds approximately $1.13 trillion in U.S. Treasury bonds, making it the largest foreign holder, followed by China with $784 billion [1] - Kato acknowledged that Japan's stance on not selling U.S. bonds could be used as a negotiation tool, although he did not indicate any intention to sell [1][2] - The discussion around Japan's bond holdings is seen as a serious matter, with potential market impacts even from mere threats of selling [1][2] Group 2: Trade Negotiations - Japan's chief negotiator, Ryosei Akazawa, is currently in Washington for the second round of trade talks, aiming to reach an agreement by June [1][3] - The discussions include topics such as expanding bilateral trade, non-tariff measures, and economic security cooperation [3] - There is no indication that currency reserves or related issues were discussed during the meetings, focusing instead on trade agreements [3] Group 3: Market Reactions and Historical Context - Previous comments by Japanese officials regarding U.S. bonds have been cautious due to potential market volatility, making Kato's remarks particularly noteworthy [2] - Historical context is provided by referencing former Prime Minister Ryutaro Hashimoto's past comments that led to significant market declines [2] - Analysts suggest that linking U.S. Treasury bonds to trade negotiations could lead to increased risks for U.S. bond investors if foreign investors begin to sell off [3]