The US bond market has experienced a rare sell-off, with the 10-year Treasury note seeing its yield surge above 4.5% this week. This unusual trend is raising concerns that global investors are losing confidence in America’s economic stability.
Typically, stocks and bonds move in opposite directions, with stocks being riskier and bonds considered safer havens. However, during times of market turbulence, demand for lower-risk bonds often increases, causing stock prices to drop.
The sell-off has experts worried about the potential implications for consumers, businesses, and the overall economy. Rising yields on 10- and 30-year Treasurys make it more expensive for the federal government to borrow money, which could impact mortgage rates, credit card interest, and personal loans.
“It matters to nearly all Americans,” said Natalie Colley, a financial planner. “Gone are the days of a pension.”
The sell-off has also raised concerns about investor confidence in the US economy. Treasury Secretary Scott Bessent downplayed the situation, calling it an “uncomfortable but normal deleveraging” in the bond market.
However, experts point to other warning signs, including a sharp decline in the value of the US dollar relative to global currencies. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, noted that this trend suggests investors are shifting their preferences away from the US economy.
“We’re not sure what’s causing it,” said Barclays analyst Ajay Rajadhyaksha. “But we know it’s not normal.”
As investors navigate this uncertainty, financial planners are advising clients to stay calm and consider diversifying their portfolios. Younger investors can focus on building emergency savings, while older retirement savers may want to explore protective measures, such as buffer ETFs.
“It’s probably not a good idea to go whole hog in any of these,” said Lee Baker, founder of Claris Financial Advisors. “But we can certainly reduce your downside while giving you some upside with a combination of these things.”
Source: https://www.nbcnews.com/business/markets/bond-market-moves-raise-fears-growing-bets-america-rcna200936