The Treasury Market is Trading Like Risky Assets in a Warning to the President

For decades, U.S. Treasury bonds have been seen as the ultimate safe investment — the go-to asset in times of market turmoil. Whether during the 2008 financial crisis, the aftermath of the 9/11 attacks, or even after the U.S. lost its perfect credit rating, Treasuries consistently rallied as investors sought shelter. But that image is now being challenged as global trade tensions, driven by President Donald Trump’s aggressive stance, upend long-held assumptions.

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In recent days, longer-term Treasury yields have jumped, while the U.S. dollar has dropped sharply. What’s raising eyebrows among investors and analysts alike is the unusual behavior of Treasuries.

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Traditionally seen as safe havens, these bonds are now moving more like risky assets. When stocks, cryptocurrencies, and other volatile investments are being sold off, Treasuries have also been dumped — sending their prices down and yields up. At other times, they’ve rallied alongside those riskier assets, defying conventional logic.

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This erratic pattern has left many wondering whether Treasuries are losing their haven status. Former Treasury Secretary Lawrence Summers even compared the behavior of U.S. bonds to the debt of an emerging-market country — volatile and vulnerable. And while many experts believe the current volatility will eventually subside and markets will return to a more typical rhythm, the message to Washington is clear: investor trust in U.S. debt is no longer a given.

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Years of large-scale government borrowing have significantly expanded the U.S. debt burden. At the same time, President Trump’s unpredictable policies — both at home and abroad — have created tension with key international creditors. Together, these factors are starting to erode the confidence investors once had in U.S. financial leadership.

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This shift carries enormous implications. U.S. Treasuries aren’t just another investment option; they form the backbone of the global financial system. They serve as a pricing benchmark for everything from corporate bonds and mortgages to sovereign debt in other countries. They’re also used as collateral in massive daily lending operations. Their perceived safety has always been linked to the stability of the U.S. economy, its political system, and the credibility of its monetary and fiscal policy.

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Jim Grant, founder of the influential newsletter Grant’s Interest Rate Observer, noted that Treasuries and the dollar derive their strength from the global perception of the U.S. as a competent economic manager. “Possibly, the world is reconsidering,” he said, reflecting the unease spreading through financial markets.

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Thursday brought a sharp selloff in stocks, bonds, and the dollar, intensifying fears that foreign investors might be fleeing U.S. assets. The yield on 30-year Treasuries rose by 13 basis points to 4.87%, while the dollar saw its steepest declines against the euro and Swiss franc in a decade. “Treasuries are not behaving like a safe haven,” said ING strategist Padhraic Garvey. He acknowledged that yields could fall again in the event of a recession, but for now, Treasuries are being viewed as “a tainted product.”

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This reversal has made U.S. bonds look less attractive compared to German Bunds, which have outperformed Treasuries significantly. Investors searching for safety appear to be shifting toward Europe, particularly Germany, further highlighting the declining appeal of U.S. debt.

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The selloff became so intense midweek that some analysts speculated the Federal Reserve might need to intervene. President Trump, responding to market jitters, delayed some planned tariffs, admitting he had been watching the markets and noticed growing nervousness. Despite ongoing chaos, he claimed, “The bond market now is beautiful.”

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Not everyone agrees that investors are turning their backs on Treasuries. Benson Durham, head of global asset allocation at Piper Sandler and a former Fed economist, said that while it’s fair to question U.S. economic management, he hasn’t seen concrete signs of a broad rejection of U.S. debt. By comparing Treasury yields with their European counterparts, Durham found that investors aren’t demanding a significant premium to hold U.S. bonds — a signal that panic may not be widespread just yet.

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Still, some believe there are other reasons behind the selloff. Though there's no clear proof, some suspect that China could be reducing its holdings of U.S. debt in retaliation for tariffs. Others suggest that technical forces are at work, particularly hedge funds unwinding complex trades involving Treasuries, interest rate swaps, and futures contracts.

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Treasury Secretary Scott Bessent weighed in earlier in the week, stating on Fox Business that the recent bond market movements are part of a “normal deleveraging” process. He dismissed the idea that anything systemic is wrong, suggesting that what’s happening may be uncomfortable but isn’t a sign of deeper trouble. When he took office, Bessent had even made lower borrowing costs a policy goal, but recent events have made that a more difficult target to reach.

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