Sharp US bond selloff revives flashbacks of COVID-era 'dash-for-cash'
Source: Reuters
The $29-trillion Treasury market had surged in recent weeks as investors dumped stocks for the safety of government bonds in a tariff-fueled risk-off shift. But on Monday, even as equities stayed under pressure, Treasuries were hit by a wave of selling that sent benchmark yields soaring by 17 basis points on the day, while trading within a yield range of about 35 basis points, one of the wildest trading swings for 10-year yields in two decades.
The selloff picked up pace on Tuesday and into Wednesday, pushing benchmark 10-year yields above 4.425%, 16 basis points higher on the day. Some market participants said they believed based on the dramatic Treasury market moves and sharp tightening of swap spreads that investors including hedge funds have been selling liquid assets such as U.S. government bonds to meet margin calls due to portfolio losses across asset classes. Some hedge funds have offloaded stocks as the market plunge forces them to curtail trading using borrowed cash.
Besides the sharp increase in yields, several analysts also pointed to changes in the price differential between Treasuries and interest rate swaps as evidence of specific selling of Treasuries, as opposed to a broader move reflecting, for instance, changes in monetary policy expectations.
An executive catering for hedge fund clients at a large bank, speaking on condition of anonymity, said investors have been looking for alternatives to U.S. assets amid market volatility, including alternatives to U.S. Treasuries.
Read more: https://www.reuters.com/markets/rates-bonds/global-markets-tariffs-treasuries-analysis-2025-04-09/
The US Treasury bond selloff and Goldman Sachs this morning announcing a 65% chance of recession was what made Trump issue the 90 day pause on the 30% tariffs (albeit keeping the 10% baseline on 70 countries, as well as 125% tariffs on China). That bond selloff means interest rates will rise, and the dollar loses value, making imports even more expensive for Americans.
With US trade policy left to the whims of an ignorant 78-year-old hopped up on Adderall, there is no certainty in US investments. Investors need certainty to invest, so there will be much less investment in US businesses/hiring, thus stalling growth.
If the world no longer sees US Treasury bonds as the gold standard safe haven, we are truly fucked. What we pay in interest for our $36 Trillion national debt will skyrocket and stagflation (low growth + high inflation) will torture Americans for the foreseeable future.
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