12 Feb 2026

The participation of foreign buyers (mainly Europe and Japan, China has sold nearly all of its Treasury holdings) in yesterday’s 10Y Treasury auction was 70%, up from 65% in Dec, and far above the 60% dreaded by markets. This is a resounding yes in a US dollar confidence referendum. It shows allies remain loyal to the US, resisting the rise of the yuan to a reserve status, despite Trump’s foreign policies that mark a significant deviation from a rules-based world order, which has alienated allies and sharpened the foes’ resolve to fight back. The pragmatism of central banks (ECB & BoJ) prevailed over a general feeling of resentment at least in Europe. 

This Letter highlights the importance of the Treasury auction. The US fiscal-monetary wedge (easy fiscal policy-tight monetary policy) is identified as a potential catalyst for asset implosion & dollar plunge.