The U.S. Treasury market will be closely watched this week as investors consider if the risk premium for the world’s “safe asset” is in the process of resetting high.
One week of trading doesn’t change decades of precedent for the world’s primary “safe” asset, but reports that the global marketplace is rethinking risk for US government bonds is deeply unsettling for several reasons.
Two warnings as loud as ever that US also feels (short-term?) pain from the tariff war - yields rise, USD falls, gold is rocketing up, BTC decoupling from Nasdaq.
If a genuine unwinding gets underway, there is a long way to go on the downside. But it is too soon to declare that. Yes, volatility bulls were unable to cling on to the weekly highs, but there are several layers of defendable support underneath.
The U.S. stock market has been on a roller coaster ride since Donald Trump took office, with incredible volatility as U.S. reciprocal import tariffs were imposed and then scaled back.
The “fair value” for the US 10-year Treasury yield edged higher in March vs. the previous month and is now approaching the 4.0% mark, the highest estimate in 16 years.
Ignoring the market’s manic reaction, the baseline economic impact here is still damaging at worst and significantly uncertain for 90 days at best. So, we still have no idea what’s happening with tariffs, which is the worst part about all of this.
