In a startling twist that could signal deeper cracks in America’s financial foundation, global investors are rapidly offloading U.S. government bonds — once considered the safest assets on Earth — in what experts say may reflect eroding trust in the United States under President Donald Trump’s leadership.
Despite Trump’s recent tariff pause aimed at restoring market calm, the bond sell-off has accelerated. Treasurys, which serve as critical instruments for U.S. borrowing, are being dumped even as interest payments on them rise — a rare and ominous development that has market watchers deeply concerned.
“This is more than a market move — it’s a warning shot,” said George Cipolloni of Penn Mutual Asset Management. “The U.S. is supposed to be the world’s safe haven. When that changes, everything changes.”
The yield on the benchmark 10-year Treasury surged from 4.01% to 4.58% within days — an enormous swing for a market where movement is typically measured in hundredths of a percent. Higher yields reflect falling demand and could lead to increased borrowing costs for everything from mortgages to business loans, potentially triggering a wider economic slowdown.
While markets typically see bonds rise when stocks fall, recent behavior has shattered that norm. The simultaneous decline in both has stunned analysts, many of whom are grappling to understand what’s driving the reversal.
One major culprit? Waning confidence in U.S. stability, especially amid Trump’s unpredictable policy shifts, trade threats, and ballooning national debt. “This feels less like a blip and more like the world second-guessing the U.S. as a partner,” said Mike Arone of State Street Global Advisors.
Some investors suspect countries like China — major holders of U.S. debt — could be subtly retaliating against Trump’s trade aggression. But such a move would likely damage their own economies, suggesting broader structural concerns may be at play.
Others blame aggressive hedge fund strategies like the “basis trade,” which involve heavy borrowing. As markets shift, lenders demand repayments, forcing funds to liquidate their bond holdings — further pushing up yields.
Treasury Secretary Scott Bessent downplayed the crisis, calling it a “normal deleveraging.” But on Air Force One, Trump admitted the bond market influenced his decision to pause tariffs, boasting: “I solved that problem very quickly. I’m very good at this.”
Yet markets may not be so easily convinced. As Trump struggles to reassure investors, memories of past crises resurface — like the U.K.’s 2022 bond collapse that forced Prime Minister Liz Truss to resign after just 49 days in office.
“There’s no substitute for Treasurys,” said Wells Fargo’s Brian Rehling. “But if investors start to believe the U.S. isn’t the safest bet anymore, the implications are enormous.”
For now, the bond market — long a barometer of confidence in American governance — is flashing red.