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Treasuries added to gains along with their Asian peers as concern over a slowdown in the world’s largest economy spurred demand for haven assets.
The US 10-year yield fell four basis points to 4,18 percent and a gauge of Treasury volatility jumped to a four-month high, reflecting weak market sentiment.
Australia and Japan’s 10-year bond yields dropped about six basis points each.
Government bonds globally are rallying as bets on US exceptionalism wane on concern that President Donald Trump’s policies, including his chaotic tariff roll-out, may send the US economy into a recession. Comments from Trump and Treasury Secretary Scott Bessent signalling tolerance for a slowdown in the economy are rattling stock markets around the world, while sending investors scurrying for sovereign debt.
Trump and Bessent “are implicitly acknowledging they will accept near-term economic pain,” said Stephen Spratt, a rates strategist at Societe Generale SA in Hong Kong.
“With inflation more contained, Treasuries are back front and centre as the preferred risk hedge.”
Over the weekend, Trump said the economy faces “a period of transition,” when asked if he expected a recession this year. That followed Bessent’s remarks on Friday that there could be “a detox period” as the market and economy have become addicted to government spending.
Unpredictable tariff policies are also spurring risk aversion. Trump imposed 25 percent tariffs on most Canadian and Mexican products this month only to delay full implementation as stocks plunged.
Actions taken by the Department of Government Efficiency to reduce federal head counts have also left thousands of government employees and contractors out of work, which could add to growth headwinds.– Bloomberg
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