The US bond market has seen a sharp increase in yields, with the 10-year Treasury now at around 4.5%, due to President Trump’s escalating trade war. This rise has raised concerns among investors that the country is no longer considered a safe haven.
Analysts point to foreign investors’ selling of US Treasuries as a major contributor to the chaos. Japan, which holds over $1 trillion in US debt, has already reduced its holdings by more than a quarter of a trillion dollars since 2021. A decline in the value of their investments due to tariff policies could have severe consequences for the global economy.
The yield on the 30-year Treasury bond has also seen significant growth, with some analysts warning that this could lead to a rapid increase in US interest rates. This would be detrimental to economic growth and consumer borrowing costs.
The Federal Reserve’s response to the situation is seen as uncertain, with officials acknowledging that markets are still functioning well but remaining prepared to intervene if needed. However, their hesitation to cut interest rates has raised concerns among investors.
As a result of this turmoil, alternatives such as German bunds have become more attractive to foreign investors seeking safe havens. The spread between 10-year German bunds and Treasuries has narrowed in recent weeks but has since reversed.
With the global economy facing uncertainty, investors are left scrambling to find new sources of stability.
Source: https://www.nytimes.com/2025/04/11/business/economy/treasury-bonds-tariffs.html