The bedrock of the financial system trembled this week, with government bond yields rising sharply as the chaotic rollout of tariffs shook investors’ faith in the pivotal role played by the United States in the financial system.
U.S. government bonds, known as Treasuries because they are issued by the U.S. Treasury, are backed by the full faith of the American government, and the market for Treasuries has long been deemed one of the safest and most stable in the world.
But the Treasury market’s erratic behavior all week has raised fears that investors are turning against U.S. assets as President Trump’s trade war escalates.
The yield on the 10-year Treasury, which underpins corporate and consumer borrowing and is arguably the most important interest rate in the world, rose roughly 0.1 percentage points on Friday. The rise added to sharp moves throughout the week that have taken the yield on the 10-year Treasury from less than 4 percent at the end of last week to around 4.5 percent.
These increases may seem small, but they are large moves in the Treasury market, prompting investors to warn that Mr. Trump’s tariff policies are causing serious turmoil. It matters to consumers as well. If you have a mortgage or car loan, for example, then the interest rate you pay is related to the 10-year yield.
Ten-year treasuries are also considered a safe haven for investors during time of volatility in the stock market, but this week’s sharp rise in yields have made this market unusually perilous.
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Source: Economy - nytimes.com
