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The recent surge in Treasury yields has sent ripples through the $29tn US government bond market, with the 10-year Treasury yield reaching its highest level since February. This increase, climbing 0.19 percentage points to 4.58 per cent, has caused concern among traders who are experiencing worsening liquidity in the market.
Investors are feeling the impact of a deepening slump in the bond market, traditionally seen as a safe haven for global financial assets. The rise in yields can be attributed to uncertainty surrounding US policymaking and the economy, particularly in light of President Donald Trump’s unpredictable tariff policies.
Although Trump recently announced a temporary pause on reciprocal tariffs for most major US trading partners, tensions with China have escalated with steeper levies imposed on Chinese imports. This uncertainty has led to a global sell-off of US assets, as foreign holders seek to divest from Treasuries and corporate bonds.
The sell-off in Treasuries, which is on track for its worst week since 2019, has also contributed to a decline in the dollar’s value against major currencies. The movement of the dollar against currencies like the yen, pound, and franc indicates a lack of confidence in the strength of the US bond market.
As investors flee US assets, German Bunds have become a preferred alternative, with the 10-year German yield experiencing a decrease. Poor liquidity in the market has exacerbated these movements, with market depth significantly lower than normal averages, leading to significant shifts in yields even with small trades.
In conclusion, the current state of the US government bond market reflects a broader sense of uncertainty and volatility in global financial markets. Stay informed about these developments and more by unlocking access to the White House Watch newsletter, your go-to source for all things related to the 2024 US election and its implications for Washington and the world.
