China may make a ‘retaliatory’ move that could ‘hit' US homeowners 'hard.' Here's what Beijing's saying

Vawn Himmelsbach

Sun, May 4, 2025, 9:45 AM 5 min read

Mortgage rates are climbing in response to a sell-off off in U.S. Treasury bonds, according to CNBC.

Throw in an accelerated sell-off in China and things could get much worse.

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Mortgage rates tend to track the 10-year Treasury yield, so it doesn’t bode well for mortgages if investors decide to sell U.S. Treasury bonds.

Adding to the risk is the possibility that U.S. mortgage-backed securities (MBS), 15% of which are held by foreign countries, could also be increasingly on the selling block

“If China wanted to hit us hard, they could unload Treasuries," Guy Cecala, executive chair of Inside Mortgage Finance, told CNBC. "Is that a threat? Sure it is.”

At the time of writing, President Donald Trump had imposed tariffs of 145% on Chinese goods, while China retaliated with tariffs of 125% on imported American goods.

The Chinese central bank recently made a public statement addressing its foreign-currency assets, including U.S. Treasuries. At a briefing in late April, Zou Lan, a deputy governor of the People’s Bank of China, said that the country had no plans to radically alter its foreign reserves despite recent volatility in the Treasury market.

“One single asset’s change in a single market will have a limited impact on the reserves,” he said.

China’s foreign exchange reserves were $3.24 trillion at the end of March, a 1.2% increase from the end of 2024.

Still, no one knows what future may hold. If countries like China do eventually decide to dump U.S. Treasuries and MBS in retaliation for tariffs and trade policies, how could that impact you?

Treasury securities are bonds issued and backed by the U.S. federal government, while mortgage-backed securities (MBS) contain pools of mortgages.

Foreign countries own $1.32 trillion of U.S. mortgage-backed securities, according to a global markets analysis from Ginnie Mae. China is one of the largest holders of agency mortgage-backed securities, along with Japan, Taiwan and Canada.

If Chinese institutions started selling off MBS — and if other countries start following suit — it could ripple through global financial markets.