Recent reversals of trade decisions and heightened market volatility have left investors and market observers unsettled, challenging long-held assumptions about the stability of U.S. financial assets. Traditionally, U.S. Treasurys and the dollar have served as safe havens in times of uncertainty, but recent events suggest that confidence in these assets may be wavering, at least temporarily. As The New York Times reported, “turmoil in bond markets last week” has prompted some to question whether the old rules still apply.
Yet, a closer look at the data reveals a more nuanced picture. While the headlines have focused on dramatic swings, the underlying shifts in investor sentiment may not be as stark as they appear. The pace of change in the markets has been so rapid that what seems clear one day can be upended the next.
“In any market, there’s going to be hysteria, there’s going to be fundamentals, and there’s going to be speculation,” Giacomo Santangelo, senior economics lecturer at Fordham University, told GlobeSt.com. “We’re looking at it and trying to describe what’s happening. Unfortunately, we have to wait until afterward to see what happened.”
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The Treasury’s $39 billion auction of 10-year notes last Wednesday offered a window into current demand. The highest yield the Treasury had to grant to sell the debt was 4.435%, which came in below the speculative “When Issued” yield of 4.465%. This was interpreted as a sign of strong demand, further underscored by the fact that indirect bidders—including foreign central banks and private investors—accounted for 87.9% of their allotted supply, well above the average of 70%.
By the close of business last Friday, the 10-year yield had risen to 4.48%. However, on Monday, April 14, the yield opened at 4.407% and fluctuated only slightly, suggesting that demand remained robust, even after the auction.
Identifying a longer-term trend remains difficult. The most recent monthly data on major foreign holders of Treasury securities, available through January 2025, show a net increase of $572.7 billion, or 7.2%, in securities held abroad over the previous year. This includes holdings by central banks, sovereign wealth funds, and private investors. However, not all countries increased their holdings. Japan, the largest foreign holder as of January 2024, reduced its share by 5.4%, or $61.3 billion, while China, the second largest, cut its holdings by $36.9 billion, or 4.6%. Canada, the fourth largest holder, sold a net of $500 million, a reduction of 0.1%.
In contrast, the U.K.—the third largest holder—increased its holdings by 5.5%, or $38.4 billion, more than offsetting China’s reduction. Luxembourg, the Cayman Islands, and Belgium also made significant purchases, with Luxembourg’s $61.9 billion increase topping Japan’s sales, and the Cayman Islands and Belgium adding $76.6 billion and $84.6 billion, respectively.
The 10-year yield was 4.01%, as of Friday, April 4, representing the lowest closing price since October 4, 2024, when it stood at 3.98%. The subsequent jump to 4.48% within a week was, as the Times noted, the sharpest in nearly 25 years.
Meanwhile, Germany’s 10-year bond, often seen as a European counterpart to the U.S. Treasury, closed Monday at 2.51%. The country, which maintains a AAA credit rating—higher than the U.S.'s—recently announced plans to increase borrowing to strengthen its military and infrastructure, according to the Times.
While this could present an alternative to the U.S. Treasury’s dominance, the lower interest rate and the likelihood of even lower yields with increased demand make it a less attractive option for many investors.
The dollar index (DXY) opened Monday at 100.10 and remained above 99 by the end of the day. The index has been on a general downward trend since January 13, 2025, before President Trump took office, but it remains relatively high by the standards of the past four decades.
The question of whether the U.S. could face significant economic consequences from tariffs and ongoing uncertainty remains open. “Intuitively, that makes sense, and I think that’s something we’ll see later, but in the meantime, we’re going to see confusion,” Santangelo said. “That’s what creates the bumps on the roller coaster.”
As markets continue to react to shifting policies and global developments, the only constant appears to be uncertainty. For now, investors and analysts alike are left to navigate a landscape where yesterday’s safe havens are no longer guaranteed, and the search for stability continues.
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