Noah Holdings' CIO Office editor-in-chief Chen Kuncai has stated that structural pressures facing US Treasuries are accumulating, with tail risks thickening. The firm recommends overweighting gold and hard currencies as an institutional hedge while underweighting ultra-long-duration US Treasuries to avoid term premium risks under fiscal dominance. Additionally, the firm favors high-quality equities with genuine cash flows and pricing power, along with real assets like energy, infrastructure, and AI-related physical infrastructure.
Chen described "US Treasury collapse" as an emotionally charged phrase. From an asset allocation perspective, he distinguished three scenarios: first, an orderly repricing where structurally higher yields and rising term premiums push long-dated bonds into a slow bear market; second, a disorderly collapse triggered by liquidity drying up, deleveraging, or confidence shocks; and third, a "real default" where no nominal default occurs, but inflation erodes the real value of debt over the long term. As the US is a sovereign currency issuer, the probability of a nominal default is close to zero. What investors truly need to guard against are disorderly yield spikes and inflation eroding real returns for long-duration bondholders.
Currently, the notable concern is rising fiscal dominance, which demands higher risk compensation for long-dated bonds. Central bank independence is being tested, global reserve diversification continues, and Treasury market liquidity and leveraged trading dynamics could amplify volatility during shocks. This does not mean a collapse is imminent, but it does mean relevant tail risks are thickening.
Chen pointed out that since US long-term Treasury yields serve as a critical benchmark for global asset pricing, any disorderly upward move could trigger repricing across all assets reliant on long-duration cash flows, including ultra-long bonds, high-valuation growth assets, commercial real estate, and certain private assets. If falling long-dated bond prices trigger margin calls and forced selling, a feedback loop of "price declines-forced liquidation-further declines" could develop.
Noah Holdings stated it does not predict the exact timing of a US Treasury "collapse" but instead manages different scenarios through portfolio construction. The firm overweights gold and hard currencies as an institutional hedge, underweights ultra-long-duration Treasuries, and avoids term premium risks under fiscal dominance. On this basis, the firm has not abandoned high-quality equities with genuine cash flows and pricing power, nor real assets like energy and infrastructure, which show relative resilience in inflationary environments. The firm also favors AI-related physical infrastructure such as power generation, grid networks, energy storage, and data centers, which combine tangible asset attributes with structural growth logic. Global diversification away from a single currency anchor is itself the risk management approach for this era.
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