‘This is Not Normal’: Trump’s Tariffs Upend the Bond Market

The foundation of the financial system terrible on Friday, with the bond yields of the government that increase abruptly while the chaotic launch of rates has shaken the trust of investors in the fundamental role played by the United States in the financial system.

The US government bonds, known as treasure because they are issued by the United States treasure treasure, are supported by the full confidence of the American government and the treasure titles market has long been considered one of the safest and most stable in the world.

But the irregular behavior of the treasure market throughout the week has raised fears that investors are turning against US activities while the commercial war of President Trump is intensified.

The performance on a 10 -year treasure, which is the basis of the company loan and consumers and is probably the most important interest rate in the world, has increased by 0.1 percentage points on Friday. The rise of Friday was added to sharp moves during the week that took the treasury performance at 10 years for less than 4 percent at the end of last week to over 4.5 percent this week.

These increases may seem small, but they are large moves in the treasure market, pushing investors to warn that the tariff policies of Mr. Trump are causing serious riots. It is also important for consumers. If you have a mortgage or automotive loan, for example, the interest rate you pay is related to performance at 10 years.

Ten years of titles are also considered a safe refuge for investors during volatility time in the stock market, but the strong increase in returns this week made this market unusually dangerous.

The returns move in the opposite direction to prices. Therefore, since yields have increased unexpectedly, investors from all over the world support trillions of dollars of treasures are suddenly seeing their value.

The increasing returns on the 30 -year bond were also historical, analysts said. This link is considered a particular refuge for pension funds and insurance companies, because they have liabilities that extend in the future, therefore they need goods that correspond.

“This is not normal,” wrote Ajay Rajadhyaksha, global research president at Barclays, in a Friday report. Struggling of an explanation, Rajadhyaksha indicated speculation by Asian investors who sell in response to rates, as well as the possible performance of highly leveraged betting in the treasure market. “Whatever the reason, right now, the bond markets are in trouble,” he said.

Another worrying sign this week was the decrease in the US dollar, which collapsed by 0.8 percent compared to a currency basket that represent its main commercial partners on Friday. Each currency of the 10 nations group rose against the dollar, further indicating a removal from US activities.

A weaker dollar simultaneously with the bonds and government bonds is a rare combination, given the role of the dollar as a safe refuge of the global financial system.

Despite the collapse of months in the stock market, which is approaching a bears market, it was the market of bonds that seemed to be “nausea” that Trump said that he pushed him on Wednesday to pause the worst of his rates for most countries.

“The commercial war of President Trump, launched in” Liberation Day “, quickly clashed with a more formidable force than foreign retaliation: the US Treasury Market from $ 27”, said Matt Eagan, head of the portfolio at the Loomis fund manager, Sayles & Company. “While returns increased and liquidity threw themselves, the bond market started to flash warning signals.”

For investors, the moves echoed to the oscillations of the wild price from the Sell-off induced by Pandemia in March 2020 and before this, a volatility attack in September 2019. These events tightened investors and pushed a quick intervention by the Federal Reserve to stabilize the market.

This time, the Fed is in a more complicated position. The inflationary effect of the rates deserves the central bank keeping interest rates high. But it would be more favorable to financial markets and economic growth to reduce interest rates, something that the central bank has so far resisted.

On Friday, a widely observed measure of consumer feeling has fallen to the lowest level in about three years. Expectations on where inflation will be 12 months behind the Fed challenge.

Foreign investors are among the major owners of the United States government debt. Japan is the largest, based on official data, with over 1 trillion of US treasure debt dollars. The next largest in China, which holds $ 760 billion in treasures, having already reduced its participations of over a quarter of trillion dollars since 2021.

“Wake Up People”, Andrew Brenner, an veteran merchant of bonds and head of the international fixed income at National Alliance Securities, wrote in a short and -mail. “This is a foreign money that comes out of the treasure market due to tariff policies”.

Some analysts and investors fear that a faster rhythm of sale by foreign investors can push the returns of the US treasure and with their US interest rates, even higher.

“Choosing fights with the main commercial partners who also finance your debt becomes particularly risky with a large tax deficit and no credible plan to strengthen,” said Eagan.