The bond market is upset by Trump prices

The basis of the financial system trembled this week, the state bond yields increasing sharply while the chaotic deployment of the prices shaken the faith of investors in the pivotal role played by the United States in the financial system.

The obligations of the American government, called treasury bills because they are issued by the American treasury, are supported by the full faith of the American government, and the market for treasury bills has long been considered one of the safest and most stable in the world.

But the erratic behavior of the treasury market all week has raised fears that investors are turning against American assets as President Trump’s trade war degenerates.

The yield on the treasure at 10 years, which underpins the borrowing of companies and consumers and is undoubtedly the largest interest rate in the world, increased again on Friday. Friday increase added to net movements throughout the week which took the yield on the treasure at 10 years, going from less than 4% at the end of last week to around 4.5% this week.

These increases may seem low, but these are important movements on the treasury market, encouraging investors to warn that Mr. Trump’s pricing policies cause serious troubles. It also counts for consumers. If you have a mortgage or car loan, for example, the interest rate you pay is linked to the yield at 10 years.

Treasury bills at ten years are also considered a safe refuge for investors during periods of stock exchange on the stock market, but the sharp increase in yields of this week made this market unusually perilous.

The yield of an obligation moves in the opposite direction at its price. Thus, as yields have increased unexpectedly, investors around the world hold billions of dollars in treasury bills see the value of their assets suddenly decrease.

The increase in yields on the 30 -year obligation was also historic, analysts said. This obligation is considered to be a particular refuge for pension funds and insurance companies, because they have responsibilities that extend in the future, they therefore need assets that correspond to this.

“It’s not normal,” wrote Ajay Rajadhyaksha, World Research President at Barclays, in a report. Fath for an explanation, Mr. Rajadhyaksha underlined speculation by Asian investors who sell in response to the prices, as well as the possible relaxation of Paris leveraging on the treasury market. “Whatever reason, at the moment, the bond markets are in difficulty,” he said.

The yield on the bond of the treasure at 30 years increased by 0.44 percentage points this week, trading roughly flat on Friday. The movement reported a clear request for the request for the long obligation. The federal reserve fixes some very short -term interest rates which are then reversed in the financial markets. But the more the prices of the Fed that you are going, the less the central bank has an impact.

“Once you have ended, they are not really in the photo,” said Matt Eagan, portfolio director at Fund Manager Loomis, Sayles & Company. “There are fewer natural buyers on this market. Small changes to supply and demand can cause large oscillations. ”

As a general rule, the treasury market of nearly 30 dollars is too important to be considerably affected by changes in the purchase of appetites, analysts said, stressing how serious the current movements have been.

A measurement of volatility on the treasure market has reached its highest level since October 2023.

“There have been a lot of sales that we have seen,” said Vishal Khanuja, portfolio manager for the Total return bond fund at Morgan Stanley Investment Management.

Another worrying sign of this week was the drop in the US dollar, which dropped 0.9% against a basket of currencies representing its main business partners on Friday. Each currency of the group of 10 nations has increased against the dollar, pointing more towards a distance from American assets.

A lower dollar at the same time as state bonds and actions are sold is a rare combination, given the role of the dollar as a refuge of the global financial system.

Despite the crisis of months on the stock market, which approaches a lower market, it is the bond market which seemed “uncomfortable” which, according to Mr. Trump, prompted it Wednesday to suspend the worst of its prices for most countries.

“The elephant of major risks in the room is the treasure market,” said Eagan.

Officials of the Federal Reserve have recognized recent giations, but are not yet too alarmed. Susan Collins, president of the Boston Fed, said The markets “continued to work well”. There was no “concerns of liquidity overall,” she said, even if she added that the central bank “would be absolutely prepared” to intervene if necessary.

For investors, the movements echoed the wild prices of the sale of the sale induced by the pandemic in March 2020 and before that, a volatility stroke in September 2019. These events frightened investors and caused rapid intervention of the federal reserve to stabilize the market.

This time, the Fed is in a more delicate position. The inflationary effect of the prices ensures that the central bank kept high interest rates. But it would be more favorable to financial markets and economic growth to reduce interest rates, which the central bank has so far resisted to do.

Friday, a widely observed measurement of consumers’ feeling fell to its lowest level in about three years. The expectations of the place where inflation will be in 12 months has skyrocketed, stressing the Fed’s challenge.

In the meantime, the chaotic implementation of this week, then partial stay, on the world rates, followed by an escalation of the trade war between the United States and China, left global investors uncertain to rely on the treasure market, or even the US dollar, as a source of security and stability.

Foreign investors are among the greatest holders of the American government’s debt. Japan is the most important, based on official data, with more than $ 1 billion of the Debt of the American Treasury. The next largest in China, which contains $ 760 billion in treasury vouchers, having already reduced its assets by more than a quarter of Billion of dollars for 2021.

“Wake Up People,” wrote Andrew Brenner, a bond trader and international fixed income manager at National Alliance Securities, in a brief e-mail. “These are foreign money that leaves the treasure market due to pricing policies.”

Some analysts and investors fear that a faster pace to sell by foreign investors can push the yields of the American treasury, and with them the even higher American interest rates.

“The selection of fights with the main business partners who also finance your debt becomes particularly risky with a large budget deficit and no credible plan to brake it,” said Eagan.

Alternatives around the world also benefit. Germany recently announced its intention to invest in its soldiers, funded by a new debt. The country’s bond market is considered a reference in Europe and is often compared to the treasury market.

While the concerns about the prices were initially installed last week, the spread or the difference, between the yield on the German bunds at 10 years old and the treasury bills at 10 years, while investors were looking for American paradise.

It quickly overturned.