Are Investors Selling US Treasuries As Trump Attacks Powell? Here's What Latest ETF Flows Tell You

Fears of the end of the U.S. exceptionalism trade have triggered a rare, simultaneous selloff across stocks, Treasuries and the dollar in recent weeks, as concerns over tariffs and the politicization of the Federal Reserve under President Donald Trump continue to mount.

Since Trump's self-declared "Liberation Day" on April 2, when he unveiled sweeping "reciprocal tariffs" on U.S. trading partners, the market reaction has been swift and broadly negative. U.S. government bonds, traditionally a refuge during equity volatility, have failed to provide a safe haven.

The Trump-Powell Tension Behind The Market Unwind

Market fragility was further exposed by Trump’s open attacks on Fed Chair Jerome Powell.

First, he wrote last week on Truth Social, "Jerome Powell is always too late and wrong. His termination cannot come fast enough."

Then, during a press conference with Italy's Giorgia Meloni, he pushed the issue further: "If I want him out. He’ll be out of there real fast. Believe me."

Confirmation from National Economic Council Director Kevin Hassett that the administration is "considering" removing Powell before his term ends in 2026, also added fuel to the fire.

On Monday, the Trump-Powell drama escalated again, sending shockwaves across currency markets, where central bank independence is viewed as a cornerstone of stability.

Trump posted on Truth Social, pushing for "preemptive" interest rate cuts. He wrote that with energy costs and food prices falling — sarcastically referencing Biden's "egg disaster" — inflation was virtually gone. The president warned of a slowing economy unless Powell, whom he labeled a "major loser," acted immediately.

He further accused Powell of political bias during the previous election cycle, claiming the Fed Chair only cut rates to help former President Joe Biden and later Vice President Kamala Harris win the White House.

Betting markets currently assign a 23% chance on Powell no longer serving as Fed Chair by the end of the year.

Triple Threat: Stocks, Bonds, Dollar All Down

The market has responded decisively. Since April 2, 2025:

• The iShares 20+ Year Treasury Bond ETF TLT has dropped more than 6%
• The Invesco DB USD Index Bullish Fund ETF UUP, tracking the dollar index, has fallen 5.8%
• The SPDR S&P 500 ETF Trust SPY has tumbled over 8%

This rare triple selloff challenges a foundational assumption: that Treasuries typically gain when risk assets fall.

The breakdown of this historical inverse correlation has led many to wonder: Are investors abandoning Treasuries?

What the Official Data Shows, And What It Doesn't

The latest U.S. Treasury International Capital (TIC) data, covering February, doesn’t show large-scale foreign divestment.

According to Goldman Sachs, foreign investors actually net purchased long-term U.S. securities in February, including Treasuries, equities and corporate bonds.

Agency securities saw some selling, but overall the data point to continued interest from global buyers—even as market volatility ramps up.

That said, February is now outdated.

With April’s turbulence unfolding post-TIC cutoff, the latest exchange-traded fund flows could offer more immediate clues about investor behavior.

ETF Flows Reveal a More Nuanced Picture

According to data from ETFDB.com through April 18, there's no evidence of broad-based exodus from Treasury ETFs.

Despite some rotation out of long-duration ETFs like TLT and Vanguard Extended Duration Treasury ETF EDV, short- and mid-duration Treasury ETFs have attracted strong inflows during the month.

What About China?

There's also speculation that major foreign holders, especially China, could be reducing exposure to U.S. government debt in retaliation for tariffs.

Yet, Goldman Sachs analysts see little evidence of that.

They indicated the recent dislocations are "more likely related to position unwinds by levered investors than significant real money (domestic or international) selling," a view also recently expressed by U.S. Treasury Secretary Scott Bessent during a Bloomberg interview.

As Goldman highlighted, the dollar/yuan exchange rate behavior does not support the idea of major Chinese repatriation—

if Beijing were dumping Treasuries, USD/CNY would likely face sharp downward pressure, but the opposite has happened.

No Sign Of A Treasury Crisis, Yet

The bottom line: while some repositioning out of longer-dated Treasuries has been repositioned, ETF flows suggest no broad investor flight from the Treasury market.

If anything, there is a tilt toward shorter maturities, likely reflecting a desire to hedge against both rate volatility and political uncertainty.

Until more recent TIC data is available in June, ETF flows remain the best window into investor sentiment and so far, they suggest the panic narrative may be premature.

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