Government bonds are being sold while stocks are plummeting. It’s rare and raises concerns that global investors have lost some of their long-standing trust in America.
Stocks are generally considered to be a dangerous type of asset, but bonds are known as “safe shelters,” with the two usually moving in opposite directions. It is a kind of security sold to help fund government bonds – spending, and is supported by the full faith and trust of the United States to repay buyers with interest over a set period.
The same cannot be said about public companies and their stock prices. Therefore, when the stock market is booming and investors are excited to bet on the performance of American companies, the demand for low-risk bonds will dry out. During periods of turbulence, the reverse usually occurs.
I don’t know exactly why bonds are turning so much.
Barclays analyst Ajay Rajadyaksha
Instead, two markets saw simultaneous sales. The 2010 Treasury Prime Minister’s bonds surged this week with its yields exceeding 4.5%.
Because bond prices and yields are inversely correlated, an increase in yield indicates a lower bond appetite. Treasury yields over 12% over the week in 2010, with the S&P 500 rising 5.7% over a week’s volatile trading, rebounding late Friday after a string of brutal losses.
“I don’t know exactly why the bonds are turning so much,” Barclays analyst Ajay Rajadhiyaksha said in a note to his client on Friday that “this is not normal.”
The surge in Treasury yields over 10 and 30 years will cost the federal government money. The 10-year note yields are bad news for consumers as they are directly linked to mortgages, credit cards, personal and business loan fees.
“This is important for almost every American,” said Natalie Corey, partner and financial planner at Francis Financial, a New York-based company.
“The era of pensions is gone,” she said, referring to more than 70 million US savers who have access to 401(k) retirement accounts related to the market. Wall Street volatility has made many account owners uneasy in recent weeks, with some financial planners forced clients to rattle as therapists.
“If Treasurys is not a safe asset, it will have a major impact on the overall balance sheet (corporate, nonprofit organizations, pensions, households),” said Ernie Tedesci, a former top economist in the Biden administration, who is now head of the economics at Yale University’s Budget Lab. “Most of global finance is based on the security of the US treasury.”
He called recent trends in the bond market “some of the most concerning data since tariffs began.”
“It shows a deterioration in confidence in America’s position in the world,” he said.
Treasury Secretary Scott Bessent opposed such concerns and told the Fox business on Wednesday, “There’s nothing systematic about this. I think what’s going on in the bond market is an unpleasant yet normal release.”
However, experts have also seen warning signs elsewhere. The value of the dollar has skyrocketed compared to other global currencies. This week marked the biggest drop since 2022, closing Friday at its lowest level since September.
“Everything in the US is not going well right now,” Kyla Scanlon, author of “In This Economy?: How Money and Markets Really Goes,” told followers on Tiktok this week. “The US dollar is being crushed.”
She choked off the currency’s refusal to “the volatile trade policy we saw,” adding, “the markets don’t believe the US has a stable or clear economic plan.”
Neil Kashkari, chairman of the Federal Reserve Bank of Minneapolis, flagged similar concerns.
“We normally expected the dollar to go up when we see a big tariff increase. I think it gives more credibility to talk about the dollar being declining, and at the same time changing investor preferences,” he told CNBC on Friday.
There are several other possible explanations. It relates to the way hedge funds bet on the bond market. The other is that investors are anticipating preparations for inflation and now demanding higher interest rates, so they won’t lose money in the future.
“We’re looking forward to seeing you in the future,” said Douglas Boneparth, president of Bone Fide Wealth, a New York advisory firm. “It can be a very well part of the puzzle.”
Even experts who hesitate to assign causes to bond sales say geopolitical factors are difficult to ignore.
Much of global finance is based on the security of the US treasury.
Ernie Tedeski, Economics Director at Yale Budget Lab
“The idea that other countries are leaving the US doesn’t necessarily want to go down that rabbit hole,” said Lee Baker, founder of Clarice Financial Advisor in Atlanta. “But in this particular example, America turned its back on everyone else,” with a sudden new trade barrier.
For now, Baker and other wealth advisors have warned clients not to respond quickly to recent volatility. Young investors who are not close to retirement and usually have less exposure to the bond market will need to maintain their course, Corey said.
Building emergency savings “ensure you are in the right asset allocation on the life stage” and “at any point in your investment career, it will help you create a financial moat that isolates investors from panicing what’s going on in the stock market,” she said. If possible, she recommends keep at least six months of cash on hand on a rainy day.
Older retirement savers can take into account some protective measures, Baker said.
His company builds a so-called “defined outcome” ETF (so-called “defined outcome” ETF) in the client’s portfolio, which are linked to options agreements. These funds tend to be more expensive and usually limit potential benefits to the upper limit, but offer robust downside protection and has seen a surge in interest recently. BlackRock launched a new iShares buffer ETF earlier this year, billing it as a way to “mitigate risk while participating in market growth.”
Baker added that “there are many more in the world beyond stocks and bonds” to consider investing in real estate, infrastructure and private equity. However, he warned that it is usually a good idea to consult a qualified advisor first.
“It’s probably not a good idea to go to the whole pig with any of these,” he said.
