Global Bond Shift: India Dumps US Treasuries Amid ‘Sell America’ Narratives

A quiet but significant shift is occurring in the global sovereign bond market. New data confirms that the Reserve Bank of India (RBI) has reduced its holdings of US Treasuries to $174 billion, the lowest level in five years and a 26% drop from its 2023 peak.

Key Data Snapshots

• RBI US Treasury Holdings: $174 billion
• Decline from 2023 Peak: 26%
• Projected US GDP Growth (2026): 6%

The Diversification Trade

India is not alone. Major institutional investors, including Swedish pension giant Alecta and Danish funds, have recently signaled intentions to trim US debt exposure. The motivations are twofold:

The Growth Paradox: 6% GDP?

This sell-off in Treasuries creates a paradox against the backdrop of a roaring US economy. Commerce Secretary Lutnick forecasted US GDP growth could hit 6% by late 2026, driven by deregulation and tax cuts.

• The Inflation Trap: While 6% growth is politically attractive, economists warn it signals overheating. “Too many dollars chasing too few goods” could reignite inflation, forcing the Federal Reserve to keep rates higher for longer.
• Yield Curve Impact: If foreign demand for US paper wanes while the US government issues more debt to fund tax cuts, yields on the long end (10Y, 30Y) must rise to attract buyers. This “bear steepening” of the curve poses a risk to equity valuations.

For the US Dollar, this dynamic is double-edged. Strong growth supports the Greenback, but a structural loss of confidence in US sovereign debt could undermine its status as the ultimate reserve asset over the long term.