{"id":280167,"date":"2025-04-12T06:23:07","date_gmt":"2025-04-12T06:23:07","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/04\/12\/bond-market-is-upended-by-trumps-tariffs\/"},"modified":"2025-04-12T06:23:07","modified_gmt":"2025-04-12T06:23:07","slug":"bond-market-is-upended-by-trumps-tariffs","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/04\/12\/bond-market-is-upended-by-trumps-tariffs\/","title":{"rendered":"Bond Market is Upended by Trump\u2019s Tariffs"},"content":{"rendered":"<div style=\"text-align:center\"><img decoding=\"async\" src=\"https:\/\/i1.wp.com\/static01.nyt.com\/images\/2025\/04\/11\/multimedia\/11markets-tariffs-bonds-1-qclv\/11markets-tariffs-bonds-1-qclv-facebookJumbo.jpg?ssl=1\" class=\"attachment-post-thumbnail size-post-thumbnail wp-post-image\" alt=\"Bond Market is Upended by Trump\u2019s Tariffs\" title=\"Bond Market is Upended by Trump\u2019s Tariffs\" \/><\/div><p> <br \/>\n<\/p>\n<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">The bedrock of the financial system trembled this week, with government bond yields rising sharply as the chaotic rollout of tariffs shook investors\u2019 faith in the pivotal role played by the United States in the financial system.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">U.S. government bonds, known as Treasuries because they are issued by the U.S. Treasury, are backed by the full faith of the American government, and the market for Treasuries has long been deemed one of the safest and most stable in the world.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But the Treasury market\u2019s erratic behavior all week has raised fears that investors are turning against U.S. assets as President Trump\u2019s trade war escalates.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The yield on the 10-year Treasury, which underpins corporate and consumer borrowing and is arguably the most important interest rate in the world, rose roughly 0.1 percentage points on Friday. The rise added to sharp moves throughout the week that have taken the yield on the 10-year Treasury from less than 4 percent at the end of last week to around 4.5 percent.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">These increases may seem small, but they are large moves in the Treasury market, prompting investors to warn that Mr. Trump\u2019s tariff policies are causing serious turmoil. It matters to consumers as well. If you have a mortgage or car loan, for example, then the interest rate you pay is related to the 10-year yield.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Ten-year treasuries are also considered a safe haven for investors during time of volatility in the stock market, but this week\u2019s sharp rise in yields have made this market unusually perilous.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">A bond\u2019s yield moves in the opposite direction to its price. So as yields have been rising unexpectedly, investors around the world that hold trillions of dollars of Treasuries are seeing the value of their holdings suddenly decline.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Rising yields on the 30-year long bond have also been historic, analysts said. This bond is considered a particular refuge for pension funds and insurance companies, because they have liabilities that stretch into the future, so they need assets that match that.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThis is not normal,\u201d Ajay Rajadhyaksha, global chairman of research at Barclays, wrote in a report on Friday. Grappling for an explanation, Mr. Rajadhyaksha pointed to speculation by Asian investors who are selling in response to tariffs, as well as the possible unwinding of highly leveraged bets in the Treasury market. \u201cWhatever the reason, right now, bond markets are in trouble,\u201d he said.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">The yield on the 30-year Treasury bond rose 0.44 percentage points this week, trading roughly flat on Friday. The movement signaled a sharp shift in demand for the long bond. The Federal Reserve fixes a few very short-dated interest rates that then ripple out across financial markets. But the further away from the Fed\u2019s rates you go, the less impact the central bank has.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cOnce you get to the long end, they aren\u2019t really in the picture,\u201d said Matt Eagan, a portfolio manager at fund manager Loomis, Sayles &amp; Company. \u201cThere are fewer natural buyers in that market. Small changes to supply and demand can lead to big swings.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Typically, the nearly $30 trillion Treasury market is too large to be significantly affected by shifts in buying appetites, analysts said, highlighting just how severe the current moves in the market have been.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">A measure of volatility in the Treasury market reached its highest level since October 2023.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThere has been quite a bit of selling that we have seen,\u201d said Vishal Khanduja, portfolio manager for the total return bond fund at Morgan Stanley Investment Management.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Another worrying sign this week has been the decline in the U.S. dollar, which tumbled 0.9 percent against a basket of currencies representing its major trading partners on Friday. Every currency of the group of 10 nations rose against the dollar, further pointing to a move away from U.S. assets.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">A weaker dollar at the same time as government bonds and stocks are selling off is a rare combination, given the dollar\u2019s role as the global financial system\u2019s safe haven.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Despite the monthslong slump in the stock market, which is approaching a bear market, it was the bond market looking \u201cqueasy\u201d that Mr. Trump said prompted him on Wednesday to pause the worst of his tariffs for most countries.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThe big risk elephant in the room is the Treasury market,\u201d Mr. Eagan said.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Officials at the Federal Reserve have acknowledged the recent gyrations, but have not yet appeared too alarmed. Susan Collins, president of the Boston Fed, <a class=\"css-yywogo\" href=\"https:\/\/www.ft.com\/content\/0273371d-b90c-43e4-845a-e51982dd4fdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">said<\/a> markets were \u201ccontinuing to function well.\u201d There were not \u201cliquidity concerns overall,\u201d she said, though she added that the central bank would \u201cabsolutely be prepared\u201d to step in if need be.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">For investors, the moves echoed the wild price swings from the pandemic-induced sell-off in March 2020 and before that, a bout of volatility in September 2019. Those events spooked investors and prompted rapid intervention from the Federal Reserve to stabilize the market.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">This time, the Fed is in a trickier position. The inflationary effect of tariffs warrants the central bank keeping interest rates high. But it would be more supportive to financial markets and economic growth to lower interest rates, something the central bank has so far resisted doing.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">On Friday, a widely watched measure of consumer sentiment fell to its lowest level in roughly three years. Expectations for where inflation will be in 12 months time soared, underscoring the Fed\u2019s challenge.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">In the meantime, this week\u2019s chaotic implementation, then partial reprieve, on global tariffs, followed up by an escalating trade war between the U.S. and China, has left global investors unsure of relying on the Treasury market, or even the U.S. dollar, as a source of safety and stability.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Foreign investors are among the biggest holders of U.S. government debt. Japan is the largest, based on official data, with more than $1 trillion worth of U.S. Treasury debt. The next largest in China, which holds $760 billion of Treasuries, having already reduced its holdings by more than a quarter of a trillion dollars since 2021.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cWAKE UP PEOPLE,\u201d Andrew Brenner, a veteran bond trader and head of international fixed income at National Alliance Securities, wrote in a brief email. \u201cTHIS IS FOREIGN MONEY EXITING THE TREASURY MARKET DUE TO TARIFF POLICIES.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Some analysts and investors fear that a more rapid pace of selling by foreign investors could push U.S. Treasury yields, and with them U.S. interest rates, even higher.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-5\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">\u201cPicking fights with major trading partners who also finance your debt becomes especially risky with a wide fiscal deficit and no credible plan to rein it in,\u201d Mr. Eagan said.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Alternatives around the world are also benefiting. Germany has recently announced plans to invest in its military, financed through new debt. The country\u2019s bond market is seen as Europe\u2019s benchmark and is often compared to the Treasury market.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">As concerns about tariffs initially took hold last week, the spread, or difference, between the yield on 10-year German bunds and 10-year Treasuries shrank, as investors sought out the U.S. haven.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">That has quickly reversed.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.nytimes.com\/2025\/04\/11\/business\/economy\/treasury-bonds-tariffs.html\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The bedrock of the financial system trembled this week, with government bond yields rising sharply as the chaotic rollout of tariffs shook investors\u2019 faith in the pivotal role played by the United States in the financial system. U.S. government bonds, known as Treasuries because they are issued by the U.S. Treasury, are backed by the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":280168,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","fifu_image_url":"https:\/\/static01.nyt.com\/images\/2025\/04\/11\/multimedia\/11markets-tariffs-bonds-1-qclv\/11markets-tariffs-bonds-1-qclv-facebookJumbo.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[171743,6049,163575,100142,73737,164053,1602,177503,18165,163263,52,1734,166932,163486,169090],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/280167"}],"collection":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/comments?post=280167"}],"version-history":[{"count":1,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/280167\/revisions"}],"predecessor-version":[{"id":280169,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/280167\/revisions\/280169"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media\/280168"}],"wp:attachment":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media?parent=280167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/categories?post=280167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/tags?post=280167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}