Japan and China are pulling back from US government bonds, and this is bad for the US because it removes major buyers just as inflation and deficits are rising.

• Japan's currency is collapsing and inflation is surging, forcing Tokyo to sell US bonds to defend the yen. Japan's holdings dropped about $48 billion in March alone.
• China cut its US bond holdings by another $40 billion and is moving trade with Russia almost entirely off the dollar, into rubles, yuan, and gold.
• The Iran conflict pushed oil and inflation higher worldwide, making US bonds less attractive and pushing the 10-year yield up sharply.
• Japan is trapped: it cannot raise interest rates because its debt is 250% of GDP, but a falling yen makes imported food and energy painfully expensive.
• The US deficit could hit nearly 8% of GDP this year, so investors want higher yields to hold US debt, which keeps pushing bond prices down.

Outlook: Japan and China are likely to keep selling US bonds, which could push US borrowing costs higher and worsen the inflation problem.