Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

AI Summary. Rising German and Japanese 10-year government bond yields—around 2.66% and 1.25%—make those markets more attractive than US Treasuries for European and Japanese investors who hedge their dollar exposure, potentially shifting allocations toward home markets. Foreign investors own about a third of the Treasury market, mostly in longer maturities.

Greg Ritchie, Michael Mackenzie, and Mia Glass Bloomberg
Date Posted:

While German and Japanese bond yields remain below the 10-year Treasury, they may attract local investors who want to hedge dollar exposure. This could undermine foreign demand for US debt, which currently accounts for ⅓ of total holdings of Treasuries.

Are rising foreign bond yields drawing investors away from Treasuries?

Core argument: Germany's 10-year bund yield at 2.66%, reflecting the prospect of heavy issuance as the government ramps up defense spending, and Japan's 10-year yield near 1.25% after years around zero, look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure.

In Germany, the 10-year bund at 2.66% reflects the prospect of a flood of bond issuance as the government ramps up defense spending. Meanwhile, the rate on 10-year Japanese bonds has soared after spending years around zero and is now around 1.25% as investors brace for tighter monetary policy there. While both are still well below Treasury yields, they’re at levels that make them look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure when buying US securities. That might entice investors to shift allocations to their home markets, where the policy outlook appears more stable. All in, foreign ownership of US Treasuries amounts to about a third of the market, while the foreign sector was the largest source of US bond demand last year, according to a Barclays Plc analysis of fund flow data. That reflected net buying of $910 billion, about half of which was in Treasuries, they said. Crucially, the vast majority of foreign Treasury holdings are in longer maturities, according to US government data.

Takeaways by Macro Roundup® AI

  1. Germany's 10-year bund yield at 2.66%, reflecting the prospect of heavy issuance as the government ramps up defense spending, and Japan's 10-year yield near 1.25% after years around zero, look more attractive than Treasuries to European and Japanese investors who hedge their dollar exposure.
  2. Foreign investors own about a third of the US Treasury market, and the foreign sector was the largest source of US bond demand last year with net buying of $910 billion, about half of it in Treasuries, according to a Barclays analysis of fund flow data.
  3. The vast majority of foreign Treasury holdings are in longer maturities, according to US government data, while higher German and Japanese yields might entice investors to shift allocations to their home markets, where the policy outlook appears more stable.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Germany’s Spending Push Drives Up Borrowing Costs Across Eurozone — Germany's planned defence spending has pushed 10-year German government bond yields close to 3%, lifting borrowing costs across the eurozone because German debt serves as the bloc's benchmark. Investors warn this intensifies pressure on heavily indebted economies; one simulation projects Italy's debt-to-GDP ratio reaching 153% and France's 122% by 2030 absent spending cuts or faster growth.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
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