The fear is that higher interest rates would damage the economy. The problem with that worry is that the Federal Reserve could buy bonds itself, to cancel out the foreign selling. The question asks: how would they sell? That is the real issue. If the foreign central bank sells their Treasury bonds, they end up with US dollar cash. They need to do somethimg with that cash. What can they do with the US cash? - They could buy risk assets (equities, real estate) in the United States. However, countries generally do not want to buy too large positions in risky assets with their foreign currency reserves, and they would face questioning by the US government if they tried. In any event, US risk asset prices would rise, and everyone in the business press would happy, not panicking. Not a plausible option. - They could buy commodities (or goods). This is equivalent to blowing all their foreign currency reserves to buy imports. If there was a global scramble to buy commodities, such an outcome is possible. However, to do this all at once would be expensive. They would more likely want to spread purchases out over time, so that they do not drive up the price of whatever they are buying. (Furthermore, if they buy oil, the dollars would go to oil producers, who would likely reinvest back into dollars.) - They could buy other foreign currencies (third party countries). The problem is that few countries have the capacity to absorb a huge wave of inflows, and their currency would become very strong versus the US dollar. (The euro is the only plausible candidate, and most foreign reserves managers already own a lot of euros.) The involved foreign country could get mad, and freeze the assets of the foreign central bank that is moving into their currency. Countries diversify their foreign currency reserves, but try to avoid causing disruptions. - If they buy their own currency, and the are no corresponding capital outflows, their currency would get extremely strong, and/or their trade balance would have to shift into a deficit. If they buy their currency, someone has to sell. This counter-acts the reason why they have US dollars in the first place - to keep their currency cheap, to develop their export sector. In summary, it might be possible to find a scenario where such sales make sense, but they probably require something else to go wrong for the United States. Something has to cause foreigners to want to dump their dollar holdings, without worrying about their own trade position.