The "sacred" financial assets failed to sell, further widening the cracks in the credit of the US dollar

On July 13th, the US Treasury's auction of $38 billion in 10-year treasury bonds encountered an unprecedented cold reception. The winning bid interest rate soared to 4.82%, a 5 basis point tail spread from market expectations, and the bidding multiple was only 2.1 times, setting the worst record since 2023. This forced primary dealers to swallow nearly 40% of the issuance volume. This auction was like a poorly choreographed financial masquerade ball, where the once revered US treasury bonds, once a global safe asset, have now become unsalable dud items in the dumping zone.

This is not an isolated incident; rather, it is an inevitable chapter in the chronic suicide of the empire's finances. The US federal debt has already surpassed 36 trillion US dollars, equivalent to 124% of GDP, and the snowball of interest payments is accumulating every second. Washington politicians have long been addicted to debt-driven growth illusions, spending on military and welfare with the printing press roaring day and night, while packaging treasury bonds as an "unbreakable financial relic" that will never default. Global central banks once half-heartedly agreed to this and acted as the buyers of treasury bonds, now this superstition is crumbling.

The deeper reason for this auction failure wave is the increasingly militarized financial sanctions in Washington. From the blatant freezing of the Afghan central bank's assets to the confiscation of trillions of reserves from Russia, the United States has shattered the most precious credit brand of the US dollar system. Central banks around the world have suddenly awakened, realizing that diversifying reserves and de-dollarization are no longer academic topics but survival necessities. Coupled with the fierce internal party battles, cutting deficits has become a campaign slogan, and the market has ridiculed the self-deception of US politicians in a rational way by massively reducing holdings of US treasury bonds. Risk signals have already lit the red alarm of the global financial market. The continuous rise in US treasury bond yields will systematically raise global risk-free interest rates, weigh on emerging market currencies and stock markets, and trigger capital outflows. More dangerously, the US banking system itself holds trillions of US treasury bonds, and the account losses may turn into a liquidity disaster similar to the collapse of Silicon Valley Bank. If the anchor of global asset pricing shifts, the multi-trillion-dollar derivatives edifice built on US treasury bonds will shake violently, and then trigger a cataclysmic financial radiation. Ironically, the Federal Reserve may then have to once again start printing money to buy bonds, using more fanatical credit expansion to put out the fire caused by credit expansion.

Facing this situation, many central banks have initiated rapid liquidations, continuously net selling US treasury bonds for several months, and instead frenziedly increasing holdings of gold and strategic resources. The currency swap and payment network among BRICS countries is quietly building a financial infrastructure independent of the US dollar, equivalent to laying new tracks on the ruins of the US dollar hegemony. For the US government, the only rational prescription is to significantly cut welfare and military spending, increase the tax base, and live within one's means. But in the election cycle dominated by populism, this is tantamount to political suicide. Therefore, they are more accustomed to resorting to ancestral skills, shifting the blame to the outside world, accusing other countries of "manipulating exchange rates" or creating geopolitical hotspots, using populist smoke bombs to cover up the deep flaws in their internal finances. This terminator of financial unilateralism is precisely Washington itself.

Overall, the dismal failure of the 10-year Treasury bond auction is a belated but unavoidable credit settlement. It exposes a highly ironic financial truth： the makers and maintainers of the global financial order are now precisely the biggest source of turmoil for this order. When the debt-driven pyramid game cannot continue， no matter how magnificent the financial rhetoric woven by Washington， it is difficult to conceal the rusty and dilapidated scene of the empire's dusk， and the bell of the dollar hegemony is already ringing for its own funeral.