President Trump’s tariff regime has rocked investor confidence in what has long been considered not only a safe bet for investors, but a bedrock of the American economy: US Treasury bonds.
The longstanding perception that Treasurys are a “risk-free” place to park money — a perception that has long been crucial for the US government, businesses and consumers alike to keep borrowing costs low — is being eroded as Wall Street struggles to make sense of Trump’s strategy, according to experts.
“Put simply, the US long-bond rate — the Treasury — is the most important price in global finance,” David McWilliams, global economist and author of “The History of Money: A Story of Humanity,” told The Post.
“It determines how much the US government pays in interest, the size of the US government debt, the price of all American mortgages is determined by it, and the value of every company on Wall Street stems from it.”
McWilliams said that when yields on US bonds rise, “everything else goes down.”
“If the monetary world had a North Star, the US Treasury rate would be it.”
Treasury yields are soaring
Typically, Treasurys rally during times of equity market stress. This time, however, they’re falling in tandem with stocks.
Equity markets have shed a staggering $7.7 trillion in value following Trump’s sweeping tariff announcement on April 2. Meanwhile, over the past four days, the yield on the 10-year Treasury note has soared from 4.20% to 4.43%, marking its steepest rise since the height of the 2008 financial crisis.
Multiple factors are driving the selloff. Globally, bond yields have been rising on inflation fears and political developments such as Germany’s military buildup and uncertainty in France’s elections.
“The recent selloff in US Treasuries … underscores significant shifts in the bond market,” Mark White, a wealth adviser and managing partner of Karpf, White & Associates Wealth Management, told The Post.
“Rising Treasury yields typically signal investor concerns about inflation and fiscal policy, potentially leading to higher borrowing costs across the economy.”
White warned that yields can continue to rise, possibly approaching 5%.
The pain is especially acute at the long end of the yield curve. The yield on the 30-year bond has jumped nearly half a percentage point in just three days — its biggest such increase since 1982.
Worries about foreign ownership
Treasurys also are under exceptional pressure due to their ubiquity and the potential for foreign backlash against US policies. Foreign investors currently hold more than $8.5 trillion in Treasurys, according to January data from the Treasury Department.
Japan and China are the two largest holders, with China in particular drawing scrutiny amid escalating trade tensions.
However, due to opaque transactions through financial hubs like London and the Cayman Islands, the full extent of foreign exposure remains unclear, according to the Wall Street Journal.
While there have long been conspiracy theories that the Chinese government might move to sell its estimated $800 billion in Treasury bonds, there are simpler explanations to why prices have cratered in recent days — namely, that their safe haven status has been thrown into question for investors worldwide.
Treasurys are not only a benchmark for everything from mortgages to sovereign debt but are also used as collateral across vast swaths of financial markets.
“Treasuries are traditionally seen as the ‘risk-free rate,’ so volatility here matters for all asset classes,” Cody Moore, a Georgia-based wealth advisor, told The Post. “As clarity emerges on trade policy, I expect the Treasury market to stabilize, as markets crave certainty.”
US dollar dropping, too
The turmoil is also engulfing the US dollar, which suffered its biggest drop since 2022.
The ICE US Dollar Index fallen more than 8% year-to-date. It was trading at 100.26 as of 12:50 p.m. Eastern Time on Friday — the lowest level since September.
Mounting fears of a potential recession are also likely contributing to the decline.
The dollar’s sharpest losses this week were against traditional safe-haven currencies such as the Japanese yen and Swiss franc, suggesting a broader flight to safety.
“US fiscal policy is eroding the credibility, legitimacy, and stability of the American financial system, putting even the dollar’s status as the world’s reserve currency at risk,” Christopher Vecchio, head of futures and forex at streaming platform tastylive, told The Post.
Vecchio lamented the fact that “US assets are acting like we’re in the midst of an emerging markets crisis: depreciating currency, soaring bond yields, and cratering equities.”
“For most of my life, de-dollarization sounded like a fantasy. This week, it started to feel real as the globe put America up for sale amidst the world’s largest economy’s hasty attempt to rewrite the global trade order.”
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