Bernard Condon and Stan Choe, AP Business Writer
NEW YORK (AP) – The stock upbringing grabs all the headlines, but there is a major problem looming on another corner of the financial market.
Investors usually run into finances with financial turmoil, but now even the high appeal of paying interest on bonds doesn’t make them buy, so they sell them. Freak development is worried that major banks, funds and traders are losing faith in America as a stable, predictable, and good place.
“The fear is that the United States has lost its status as a safe haven,” said George Chipoloni, fund manager for Penn Mutual Asset Management. “Our bond market is the largest and most stable in the world, but adding instability can lead to bad things.”
This could be bad news for President Donald Trump, who hoped taxpayers would inflate US debt, pay interest on consumers receiving mortgages and car loans, and for his tariff mortgage earlier this week to restore confidence in the market.
what’s happening?
A week ago, the 2010 Ministry of Finance’s yield was 4.01%. On Friday, the surrender rose to around 4.50%, up 4.58%. This is a big swing for the bond market, measuring one-hundredth of a percent point.
Among the possible knock-on effects is a major blow to ordinary Americans in the form of higher interest rates on mortgages, car financing and other loans.
“We see that as yields increase, so does borrowing rates,” said Brian Rehling, head of bond strategy at Wells Fargo Investment Institute. “And all companies use these capital markets. If it gets more expensive, they need to either pass on the customer’s costs or cut down on their jobs to cut costs.”
Treasury debt is essentially from the US government, and they are the way Washington pays the bill despite earning less than its spend.
Certainly, the mix of factors behind the bust of developing bonds cannot be said exactly, but no one can say how long it lasts, but it still rattles Wall Street.
Bonds are to move in the opposite direction as inventory and rise when inventory drops. Thus, they act like shock absorbers to 401(k) and other portfolios in stock market meltdowns, and compensate for losses somewhat.
“This is ECON 101,” said Jack McIntyre, portfolio manager at BrandyWine Global, adding “people are keeping their heads in unison.”
The latest trigger for bond yields was worse than what was expected on Friday, and worse than the sentiment reads among US consumers. But this week’s extraordinary bond gains reflect deeper concerns as Trump’s tariff threats and volatile policy moves make America appear hostile and unstable.
“If this issue is a broader loss of confidence in the US, even more fulfilling hideaways to trade may not work,” wrote Sarah Bianchi, investment bank Evercore ISI, and other analysts. “I don’t know if the remaining tools in Trump’s toolkit are enough to completely push myself through the bleeding.”
The White House did not immediately respond to requests for comment, but U.S. Treasury Secretary Scott Bescent said he is not worried, even though the surge in crops is unusual, he is responsible for professional investors who are over-borrowed and need to sell.
“It’s annoying, but I think there’s normal delaverage happening,” he told Fox News Thursday, adding that “it happens every few years.”
The impact of the bond market
Trump admitted that bond markets played a role in his decision to put a 90-day suspension on many tariffs on Wednesday, with investors saying they were “a bit sick.”
Certainly, it’s a bond market, not a stock, and if he changed courses, that wouldn’t be a surprise.
The bond market response to her tax and budgetary policies was behind the UK’s ouster of Liztrus in 2022, serving as her shortest serving prime minister in the UK for those 49 days. James Kerrville, an adviser to former US President Bill Clinton, said he is well known for hoping to be reborn as a bond market because of how powerful it is.
The instinctive rush of US debt is deeply ingrained in investors.
For example, people poured money into the US Treasury during the 2009 financial crisis, despite being a source of its housing market.
But it makes sense for Wall Street pros. The US Treasury is liquid and has stable prices, making it easy to buy and sell even in panic. So of course, businesses and traders rush to wait for the storm.
The yield on US bonds fell shortly during the crisis. This was profiting beyond the cushions of my personal financial portfolio. It also helped businesses and consumers recover by reducing borrowing costs.
This time, we cannot defeat the nature correction.
What is causing the sale?
Aside from sudden uncertainty about the US, a few other things can lead to bond sales.
Some experts speculate that China, a huge holder of US government bonds, is dumping them in retaliation. However, it also seems unlikely that it will hurt the country. Selling a treasure trove or exchange U.S. dollars with essentially Chinese yuan will strengthen Chinese currency and make exports more expensive.
Another explanation is that some hedge funds’ favourite strategies – known as basic transactions – are against them, including US debt and many borrowings. This means their lenders are seeking repayment and need to raise cash.
“They sell the Treasury Department, and that’s boosting yields, and that’s part of it,” said Mike Arone, chief investment strategist at State Street Global Advisors. “But the other part is that the US has become a less reliable global partner.”
Wells Fargo’s Rehling said he was worried about the blow to confidence in the US, but he said it was certainly too early and that the sale could soon cease anyway.
“If Treasurys is no longer a place to park your cash, where would you go?” he said. “Are there any other bonds that are more liquid? I don’t think so.”
Original issue: April 11, 2025, 4:50pm EDT
