- Historic yield spike: 30-year U.S. bonds see largest weekly climb in 4 decades
- 10-year USTs rose to 4.56%, close to fall peaks
- Investors lock in bond sell-off amid fears of rising inflation and reduced trade flows
- EM markets, Europe, and Asia currencies show correction, reinforcing dollar dominance
- Cryptocurrencies, tech sector, and European debt markets under pressure
Historic yield spike: 30-year U.S. bonds see largest weekly climb in 4 decades, signaling sell-offs among funds hedging inflation or duration risks, retirement funds, and insurance companies with long-term liabilities. Also, 10-year UST yields rose to 4.56, indicating similar behavior by central banks, funds, and ETFs. This is putting huge pressure on all economic sectors in Europe and Asia, and, as a consequence supply chains, companies, and investors, the key reason for which is still Donald Trump’s trade war.
More About Historic Yield Spike – What Does It Mean for the Markets?
Another one is, unfortunately, record numbers, we can see – 30-year U.S. bonds rising 39 bps over the last week, the sharpest increase since 1981. Moreover, over the past three days, yields are up 59 bps which is even sharper. Such bonds are mostly held by funds hedging inflation or duration risks, pension funds, and insurance companies with long-term liabilities, and this signals some pretty impressive risks. The biggest players are forced to recalculate fundamentals like the real cost of debt, geopolitical risk, and the price of liquidity.
A similar situation is happening with 10-year USTs, which have also come close to their fall peaks and have shown a 4.56% increase in yield, and this is already a signal from central banks to insurance companies, ETFs, and other funds, as well as private investors. All of them are now forced to reconsider their investment strategies, and the dollar does not seem to be such an attractive instrument anymore.
All of this combined puts a lot of pressure on entire nations’ economies and creates systemic risks for national currencies, private companies, and the crypto industry too. More specifically:
- Monetary risk. A sharp rise in yields collapses the yield curve, and the cost of borrowing rises – for both government and business.
- Fiscal Risk. The US is already in a situation where up to $6 trillion of debt needs to be refinanced in 2025, and the 10-year rate is almost 4.6%. So higher tariffs and falling trade reduce tax receipts and create more debt.
- Global risk. This destruction of supply chains triggers a fall in export markets and hits EM, Europe, and Asia. We could also expect risks of “unmanaged decoupling” – i.e. tearing apart the global economy without control.
Talking about some processes and consequences for markets that we could probably see:
- The selloff in Treasuries could turn into a panic liquidity squeeze
- The dollar is rising, putting pressure on commodity currencies, weak economies, and crypto
- Banks hold bonds and if their price falls, balance sheets deteriorate, threatening a repeat of bank stresses (March 2023)
Conclusion
When big capital starts moving, and not only 10-year U.S. bonds but even 30-year U.S. bonds, it looks pretty dangerous. And we’re back to the point, and it requires highly close attention.
It is unfortunate that a key reason in the form of Trump’s trade wars is still relevant, and thus should we hope to remove the catalyst for these processes? It seems not anytime soon. Be aware, and always assess the situation comprehensively, diversify risks, and adapt your strategy to daily changes.
