Summary: .
Be worried, be very worried. Why do you think a Fed official stepped in on Friday? Because the long-end of the bond market got crushed all week long. The yield on 10-year Treasuries — which are a benchmark for the cost of everything from corporate bonds to mortgages — rose as much as 16 basis points to nearly 4.6% Friday, a more than half-percentage point increase since the end of last week, before paring the jump. The 30-year rate climbed as much as 12 basis points to nearly 5%. As for the short-end, the 2-year rose too, up 8 bps to 3.96%. The worst week since 2019. And consumer confidence is crumbling, as per the University of Michigan survey on Friday.
Over the week, the selloff in Treasuries intensified as investors continued to pull back from US assets, sending longer-dated yields toward the biggest weekly surge since the 1980s. The rout, which was set off by the US trade war that’s shaken global markets, is threatening to deal another hit to the economy by pushing up borrowing costs more broadly. It is also casting doubt on Treasuries’ status as the world’s safe haven as they slid along with the stock market this week, sending investors into other assets like the Swiss franc, gold and the Japanese yen.
The five-day climb has surpassed those seen during the chaos of the 2008 financial crisis and be the most since the early 1980s, when the high level of interest rates meant the impact was far less jarring. President Donald Trump’s erratic tariff moves have led to wild swings in US government debt over the past week by not only undermining confidence in the economy, but also the direction of US policy and America’s standing in the world. That’s eroding appetite for US assets and has spurred speculation that crucial overseas owners — like China — may retaliate by pulling back from Treasuries. Talk has also swirled about blowups in hedge fund trades and an exodus of foreign investors.
The drop in Treasury prices was accompanied by a sharp slide in the dollar — which tumbled this week by the most since 2022 — in an indication that overseas investors are pulling back from the US. The Dollar Spot Index was down nearly 1% on Friday, bringing the weekly decline to over 2% and helping to support foreign currencies across emerging and developed markets. Investors also flocked to Europe in debt markets to escape the broader turmoil, leaving German yields largely unchanged in the week while the rate US 10-year debt surged more than 50 basis points. That’s the biggest underperformance of Treasuries compared to bunds since at least 1989, according to available data.
Believe the hype on selling the US. Despite President Trump’s pause on broad tariffs, investors are still looking to shun US assets in favour of Europe and other developed markets, according to the latest MLIV Pulse survey. Of the 203 respondents to a poll conducted April 9-11, after Trump announced a 90-day reprieve on levies for most countries, 81% plan to either keep their exposure to US assets the same or decrease it. More than a quarter of respondents said they’re curbing their investment more than they had anticipated before the president unveiled global tariffs of as much as 50% earlier this month. As per our Thursday daily headline, from US exceptionalism to sell everything US. What’s the reflex trade – the Deutsche Bund, Swiss Franc, Japanese Yen, and gold.
On the macro, soft data front, the University of Michigan Consumer Sentiment survey on Friday brought a fresh signal that consumers were queasy even before Wednesday’s policy shift, with a plunge in sentiment as inflation expectations soared to multi-decades highs.
Exhibit 1. Australian 3Y/10Y Bond Yield
Exhibit 2. AU and US Bond Yields Spread
Exhibit 3. Global Bond Yields
