Us debt plunge: "risk-off king" halo no longer?

Us Treasuries, which were hailed as the "king of safe havens" by markets just last week, have suffered a stunning plunge in recent days, with 10-year yields almost exactly back to where they were before Mr Trump announced reciprocal tariffs last week. This violent volatility, like a boulder thrown into a calm lake, caused ripples in global financial markets.

Us Treasuries, an important cornerstone of global financial markets, have long been regarded as one of the safest assets. In times of economic instability or geopolitical conflict, investors tend to pile into the U.S. Treasury market in search of a safe haven. However, the plunge has defied conventional wisdom. In the past, Treasury prices and yields had an inverse relationship, with rising yields implying falling prices. The sharp rise in the 10-year US bond yield indicates that US bond prices have suffered heavy selling pressure in a short period of time.

The reciprocal tariff policy announced by Trump is undoubtedly the trigger for the plunge in US debt. This policy has broken the market's expectations of the global trade pattern and increased market uncertainty. Many investors are concerned that the escalation of trade frictions will have a negative impact on global economic growth, which in turn will affect the pace of the U.S. economic recovery. Under such concerns, investors began to reassess the investment value of U.S. bonds and sold them, causing their prices to plummet.

From the market data, in the days after Trump announced the reciprocal tariff policy, the volume of the US Treasury market increased sharply, showing that the panic in the market is spreading. At the same time, other safe-haven assets such as gold and the Japanese yen also experienced varying degrees of volatility, indicating that investors are realigning their portfolios in response to market uncertainty.

In addition to the impact of trade policy, the plunge in US Treasuries is also related to domestic economic data and monetary policy. Recent US economic data shows that the US economy is growing steadily, but at a slower pace. That has raised doubts about the Fed's future monetary policy. If economic growth continues to slow, the Fed could adopt a more accommodative monetary policy, which would have a significant impact on the Treasury market.

In addition, the supply and demand of the US bond market is also an important factor affecting the price of US bonds. In recent years, the US government's fiscal deficit has been expanding, resulting in a continuous increase in the issuance of US bonds. On the demand side, as global economic uncertainty has increased, foreign investors' appetite for US Treasuries has declined. This change in supply and demand has also contributed to the decline in US bond prices to a certain extent.

The fallout for global financial markets has been profound. First of all, as the benchmark of global asset pricing, the sharp fluctuations in the yield of US Treasuries will affect the prices of other types of assets, including stocks, bonds, foreign exchange and so on. Second, a plunge in US Treasuries could trigger a panic among global investors, leading to an outflow of funds from risky assets, which in turn could trigger turmoil in global financial markets. Finally, the plunge in US Treasuries could also have an impact on the US government's funding costs, increasing the US government's debt burden.

For investors, the plunge in US Treasuries is undoubtedly a big challenge. At a time of increased market uncertainty, investors need to evaluate their investment strategies more carefully. On the one hand, investors need to pay attention to changes in the global economic and political situation and adjust their investment portfolios in a timely manner. On the other hand, investors also need to find more diversified investment channels to reduce investment risks.

Looking ahead, the direction of the Treasury market remains uncertain. The direction of trade policy, the performance of US economic data and the Federal Reserve's monetary policy will all have an important impact on the US Treasury market. Investors need to pay close attention to changes in these factors in order to make informed investment decisions in a complex and volatile market environment. For the global financial market, the plunge in US debt has also sounded the alarm, reminding people to enjoy economic growth at the same time, but also to always be alert to potential risks.