U.S. Treasury bonds and dollar ‘selling' procession… Trust shaken due to Trump, Questioning America as an investment destination
Can Trump's tariff policy rebuild the fundamentals of the U.S. economy? (Source: WSJ)
Global investors' confidence in U.S. assets is shaking. With the selling trend of treasuries and the dollar intensifying, there is an assessment that U.S. financial assets, once considered the ‘world's safest assets,’ are losing their appeal as investment destinations.
On the 11th (local time) in the New York bond market, the yield on the 10-year U.S. treasury bond recorded 4.478%, up 8.6bp from the previous session. During the day, it rose to 4.592%, reaching a two-month high. In particular, the 10-year rate increase this week is 50bp, the largest weekly increase since 2001. Bond yields move inversely to prices.
The 30-year rate also rose to 4.856%, and on the 9th, recorded 5.023%, reaching the highest level since November 2023. This weakness in long-term bonds is the largest decline since 1982.
According to market research firm LSEG, during the same period, there was a net outflow of 15.64 billion dollars from U.S. bond funds. This is the largest scale since December 2022.
The sharp shake in the bond market is interpreted as the market expressing distrust in the financial soundness and political risk of the U.S. government, in conjunction with recent aggressive tariff policies of President Donald Trump. Brown Brothers Harriman's Win Thin strategist assessed, “The very trust in the dollar and the entire U.S. political system is being tested.”
In fact, the dollar, which usually showed strength during risk-averse phases, showed weakness this time. On this day, the dollar index, which indicates the value of the dollar against six major currencies, fell to 100.05, recording its lowest level since April 2022. In contrast, traditional safe currencies such as the yen and Swiss franc showed strength.
Neil Kashkari, president of the Minneapolis Fed, also diagnosed, “The recent surge in bond yields may signal that investors’ faith in U.S. assets has been shaken,” adding, “The phenomenon of a narrowing trade deficit may be evidence that investors no longer consider the U.S. the most attractive investment destination.”
The Trump administration maintains a policy stance aimed at correcting trade imbalances through tariffs, but the weakening of the trust base in U.S. assets as a result is evaluated as a point that could have long-term effects on the market going forward.