Goldman Sachs warned that a sharp rise in the dollar during the first month of the US‑Iran skirmish pushed foreign official institutions to offload Treasuries. The bank’s research team traced the sell‑off to a flight‑to‑risk appetite among sovereign‑backed buyers who feared currency volatility. The move dented demand for U.S. debt that usually anchors global markets in the past quarter, during the earlier month in 2024.

The withdrawal signals a broader shift in how central banks and sovereign funds weigh currency swings against yield curves. With the dollar tightening, investors chased higher‑yield assets, squeezing U.S. Treasury yields upward. Goldman’s analysis suggests that similar currency shocks could repeat, tightening liquidity for borrowers and nudging the Fed to reassess its monetary stance as the market reacts in 2024.

For portfolio managers, the lesson is clear: a volatile dollar can quickly erode Treasury demand, compressing spreads and elevating borrowing costs. Firms must recalibrate risk models to factor in currency‑driven sell‑offs, especially in geopolitically tense periods. The current episode underscores how macro shocks can ripple through fixed‑income markets, tightening funding conditions for issuers in the near future for investors today.