Bull Theory@BullTheoryio
BREAKING: The world's largest banks, sovereign governments, and multilateral institutions are quietly abandoning dollar debt and borrowing in Chinese yuan instead.
The numbers are too large to ignore.
In March 2026, foreign issuance of Panda bonds tripled year on year to 27.8 billion yuan ($4 billion) in a single month.
Total yuan denominated financing by foreign borrowers hit a record 218 billion yuan ($31.6 billion) in just the first weeks of 2026. The entire full year of 2025 saw only $167 billion raised through yuan notes and loans combined.
Look at who is actually doing this.
- Deutsche Bank issued the largest single panda bond by a foreign bank in history, 5.5 billion yuan, oversubscribed 1.55x on the 3-year and 1.63x on the 5-year
- The Asian Infrastructure Investment Bank issued 3 billion yuan the same month, with 58% of allocation taken by overseas investors
- Indonesia sold 9.25 billion yuan at roughly one full percentage point below what it paid on its euro denominated debt issued the same week
- Morgan Stanley and Barclays both became repeat yuan bond issuers in 2026
- Hungary issued sovereign panda bonds
- The Asian Development Bank raised a record 8.3 billion yuan in March 2025
The reason comes down to one number.
China's 10-year government bond yield is 1.82%. The equivalent U.S. Treasury yields 4.46%. That is a spread of 260 basis points, the widest gap since August 2025.
Borrowing in yuan is approximately 60% cheaper than borrowing in dollars right now. For governments and institutions that trade heavily with China, that calculation is straightforward.
Now look at what is happening to the dollar at the same time.
- The DXY fell 9.6% in full year 2025, the worst annual performance since 2017
- In the first half of 2025 alone it fell 10.7%, the worst first half performance in over 50 years
- The U.S. dollar's share of global foreign exchange reserves fell to 56.32%, the lowest level since 1995, down from a peak of 72% in 2001
- China's U.S. Treasury holdings fell to $682.6 billion in November 2025, down from a peak of $1.32 trillion in 2013, a 48% decline over 13 years
- China has been selling U.S. Treasuries for nine consecutive months as of late 2025
Something more structural is also breaking down inside the Treasury market itself.
Research from the National Bureau of Economic Research found that U.S. Treasuries' convenience yield, the premium investors historically paid just to hold the safest asset in the world, has turned negative, currently sitting at -0.25% for 10-year maturities.
This premium used to save the U.S. government hundreds of billions in borrowing costs annually.
State Street confirmed that since early April 2025, rising Treasury yields now signal fiscal risk, not economic strength. That is the opposite of how a safe haven behaves.
During the global bond sell off in March 2026, triggered by geopolitical tensions and surging energy prices, U.S. Treasury yields spiked to 4.4055%, a nearly eight month high. UK, Australian, and New Zealand government bonds all hit multi-year yield highs.
China's 10-year yield moved from 1.80% to 1.84%. Chinese bonds were almost stable while everything else sold off.
Now look at what just happened today.
A ceasefire between the US and Iran has been announced. The Strait of Hormuz is reopening. But Iran is charging every oil tanker that passes through $1 per barrel of cargo, with payments accepted in Bitcoin or Chinese yuan.
A Very Large Crude Carrier carrying 2 million barrels pays up to $2 million per transit. Iran's National Security Committee has already passed legislation codifying this fee structure into law.
The system is specifically designed to bypass the dollar based financial system and U.S. sanctions. At least two vessels had already paid in yuan before the ceasefire was even announced.
The world's most critical energy chokepoint is now priced in yuan and Bitcoin, Not dollars.
The trade picture makes the shift more structural than it looks.
The yuan now accounts for 34.5% of China's cross-border goods trade settlements, up from just 10% in 2017.
China is the dominant trading partner for more than 120 countries. When your largest trading partner settles trade in its own currency, you eventually need to hold that currency as a working reserve and you buy yuan denominated bonds to do it.
The offshore dim sum bond market hit a record 870 billion yuan ($123 billion) in full year 2025, its eighth consecutive year of growth. Around 30% of global central banks are expected to increase their RMB holdings over the next decade.
UBS Asset Management said the yuan's share of global central bank reserves could rise to 10% over the medium term. It currently sits at 1.93%.
For decades, there was no real alternative to the dollar. That is what made it dominant.
What is changing now is not that the dollar is broken. It is that the world has stopped assuming it is the only option. Once that assumption breaks, it does not come back.
