Taiwanese Investors Face Heavy Losses in US Bond ETFs Amid TWD Surge, Market Concentration, and Global Capital Shifts
Major institutional and retail investors are reducing exposure to US equities and bonds, sparking a shift of global capital towards European markets amid concerns over US fiscal policy, Federal Reserve actions, and renewed trade tensions. This diversification has weakened the US dollar and pressured US asset valuations. In particular, Taiwanese investors holding US bond ETFs have experienced severe losses, averaging 11-12% in May 2025, driven by a sharp appreciation of the New Taiwan dollar (TWD) and declining US bond prices. Long-term US Treasury ETFs suffered the most, with the largest Taiwan-based fund dropping 13% since April and losing nearly a third of its value since 2017. Taiwan’s ETF market is highly concentrated, with bond ETFs making up a large portion. The "Baodao Bond ETF" structure facilitates substantial USD exposure, allowing investors to bypass some restrictions on foreign bonds. Analysts warn that this overconcentration in a single asset class, combined with FX and interest rate risks, has exacerbated losses as TWD strengthens and foreign central banks reduce US Treasury holdings. Signs of capital outflow from US fixed income assets by Taiwanese investors are increasing. Crypto traders should note that these macroeconomic shifts and heightened volatility in global bond and FX markets could impact risk appetite and cross-asset flows, potentially affecting liquidity and sentiment in crypto markets, especially during ongoing geopolitical tensions.
Bearish
The news highlights increasing losses for Taiwanese investors in US bond ETFs due to both declining bond prices and TWD appreciation, set against a backdrop of large-scale capital outflows from US assets and global diversification. This trend reflects declining confidence in US markets, heightened currency volatility, and potential for further withdrawals from USD-based instruments. For crypto traders, such macroeconomic shifts often spur risk aversion and cross-asset volatility, which can negatively affect crypto prices in the short term due to reduced liquidity and increased market uncertainty. In the long term, if global investors continue to diversify away from US-denominated assets, and volatility persists in traditional markets, this could either pressure crypto markets further or—depending on investor appetite—eventually drive capital into alternative assets like cryptocurrencies. However, for now, the dominant impact is bearish as underlying market risk and uncertainty increase.