Thanks to exceptionally volatile and mostly downward trading, U.S. stocks have been under the spotlight since April started.
In the relative background, however, equally important bonds have been making major moves of their own. The rise in the 10-year treasuries yield on Wednesday, April 9, issued a stark warning that the U.S. is losing one of the key factors sustaining its economic hegemony: its status as the ultimate safe haven.
Specifically, a rise in the yield of government fixed-income securities is inversely correlated with the price of said investments, meaning that, after the ‘dead cat bounce’ of Monday and Tuesday, major holders have started selling American debt en masse.
Still, it is worth pointing out that despite the yield spiking to 4.38%, it is far from its recent highs, meaning that volatility is a far greater concern.
Why the 2025 economic crisis is different
Historically, times of economic turmoil saw a sharp rise in demand for U.S. bonds due to the strength and resilience of the American economy.
In 2025, the situation is significantly different. On the one hand, President Trump’s tariff offensive has been as unpredictable as it has been unyielding, while the underlying methodology has been repeatedly questioned.
Furthermore, uncertainty has only been made worse by the differing and equally unpredictable responses from other nations and by a lack of clear indication of how policies reminiscent of the early twentieth century could play out in the globalized world of the twenty-first century.
Is the U.S. facing economic blowback?
Along with presenting the U.S. with a soft power blow, the situation in the bond market indicates that the country’s financial pain might increase as it has rendered debt-taking more expensive and simultaneously constitutes a policy roadblock.
Indeed, one of the Trump administration’s major stated goals has been lowering rates to make the U.S.’s massive interest payments more manageable.
This aim can also be seen in the President’s request to the Federal Reserve Chair Jerome Powell to immediately start cutting the federal funds rate – a request that is yet to yield results, though the markets are increasingly counting on an emergency reduction.
Simultaneously, a Fed intervention remains uncertain as loosening conditions could exacerbate the already-heightened inflation while America’s central bank limiting the sell-off by buying bonds could further instability by limiting the potential losses for would-be leverage traders.
Who is selling U.S. treasuries?
At press time, it is unclear which sections of major bondholders are behind the strong selling pressure, though many are eying hedge funds and the Chinese government as major investors in American debt.
The China angle is arguably especially concerning as the East Asian country is relatively unique in unambiguously declaring it would not back down from the U.S. challenge, hinting at additional pain ahead for the American economy.
Interestingly, investors haven’t been flocking to gold en masse in lieu of treasuries as the commodity, despite remaining above $3,000, remains approximately $100 below its recent all-time high (ATH) near $3,160.
Instead, there has been a notable spike in demand for German debt as the country – also boasting a robust economy – appears to be increasingly seen as the alternative safe haven, according to multiple April 9 reports.
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