Investors Panic as ‘Safe Haven’ US Bonds Dive: Is Confidence in America Eroding?

NEW YORK (AP) — While stock market fluctuations are grabbing attention, there’s another significant issue lurking in the financial world: Investors are pulling away from U.S. government bonds. Normally, during uncertain times, investors flock to Treasurys for safety. This time, however, they’re selling, indicating growing concern about America as a secure place to invest money.

“The fear is the U.S. is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is known for its stability, but instability can lead to serious consequences.”

Such moves can hurt everyday Americans through higher interest rates on mortgages and loans. Brian Rehling, head of fixed income strategy at Wells Fargo Investment Institute, pointed out, “As yields go up, borrowing rates will follow suit.” This could put more financial pressure on consumers and businesses alike.

Just a week ago, the yield on the 10-year Treasury bond was 4.01%. By Friday, it jumped to 4.58% before settling at around 4.50%. These are significant shifts for the bond market, which usually changes by mere fractions of a percentage point.

Yields typically rise when investors are anxious about the stock market, acting as a safety net. “It’s basic economics,” said Jack McIntyre, a portfolio manager at Brandywine Global, about the current bond situation. “It has everyone puzzled.”

A recent survey revealed that 66% of consumers expect inflation to rise further, adding to market jitters. Meanwhile, financial experts are concerned that President Trump’s erratic policies may further damage investor confidence, making it harder to stabilize yields.

U.S. Treasury Secretary Scott Bessent described the situation as “normal” and linked it to professional investors needing to sell off assets. He suggested this kind of volatility occurs every couple of years. President Trump echoed this sentiment, claiming, “The bond market’s doing well. It had a little moment, but I solved that problem very quickly.”

This bond market volatility holds significant weight in economic decisions. It influenced Trump’s choice to pause tariffs, acknowledging that investors were feeling uneasy. Such reactions highlight the bond market’s influence, which has historically swayed major political decisions and events, like the brief tenure of former UK Prime Minister Liz Truss, who resigned due to negative market responses to her policies.

Interestingly, during the 2009 Financial Crisis, investors still sought safety in Treasury bonds despite the U.S. being at the heart of the crisis. This instinct shows how ingrained confidence in U.S. bonds is among investors. However, this time, things feel different. The usual safety net isn’t cushioning as it did before.

So, why this current sell-off? Some experts suggest it may be related to concerns about the reliability of the U.S. as a global partner. Speculation also points to China possibly moving away from U.S. bonds, but this seems unlikely since it would harm their economy as well.

Mike Arone, chief investment strategist at State Street Global Advisors, explained, “They are selling Treasurys, which is part of the yield increase. But the broader concern is about the U.S. as a reliable partner.”

The bond market serves as a critical gauge of economic health and stability. As uncertainty looms, investors are left questioning where to invest their money if Treasurys no longer feel safe. “Is there another bond out there that is more liquid? I don’t think so,” Rehling added.

These changes bring a new level of uncertainty to the financial landscape, making investors and consumers alike reflect on the reliability of their financial infrastructure. As we navigate these shifting tides, experts will be watching closely to see how these dynamics unfold.

Source link

Stocks and bonds, Liz Truss, Scott Bessent, Donald Trump, James Carville, United Kingdom, Financial services, District of Columbia, General news, Business, Brian Rehling, George Cipolloni, Wells Fargo Co., United Kingdom government, United States government, Bill Clinton, U.S. news, Jack McIntyre, Mike Arone, Financial markets, U.S. News