Anyone who thought that government bonds would provide a safe haven from the turmoil on global stock markets has just had a rude awakening. While bond yields initially fell after Donald Trump’s ‘Liberation day’, yesterday they rebounded, with the yield on 10-year US Treasury bonds hitting 4.5 per cent – higher than they were before the crisis began.
To put it another way, anyone with holdings in US government debt would initially have seen the value of their bonds rise, but now they, like most equity investors, are sitting on a paper loss.
The movements in US Treasury bonds have led some to wonder: could the rest of the world bring the US government to its knees by dumping its debt, and indeed, is that what is happening in retaliation for Trump’s tariff wars?
Given China’s announcement of 50 per cent retaliatory tariffs on US goods – in addition to 34 per cent already announced – it does rather look like an all-out trade war.
Tempting though it might be to imagine that this is what is happening, the facts do not support such a theory.
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