2025-04-04T10:17:23.000Z

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A significant shift in investor sentiment has driven the yields on 10-year US Treasuries below 4 percent for the first time since the 2016 election of Donald Trump. This movement has been primarily influenced by heightened market volatility stemming from the tariff increases announced by the US president. Investors are increasingly seeking safe havens to shield their assets from the growing uncertainty surrounding the US economy.

On Friday, 10-year US Treasury yields experienced a notable decrease, plunging more than 0.3 percentage points to settle at 3.93 percent. This drop in yields is accompanied by a surge in the price of these government bonds, placing them on a trajectory towards their most successful week since August. The price increase reflects a robust demand for Treasuries as investors react to a widespread sell-off in US stocks and the dollar, both of which faced their worst single-day performances in years.

In this climate of economic anxiety, the appetite for US debt has intensified, as many investors speculate that the ongoing tariff issues could push the US economy toward a potential recession. Fund managers have noted that the current market dynamics represent a return to a more traditional pattern, where significant declines in equity values motivate investors to seek refuge in safer government bonds. “US Treasury yields have been falling sharply as investors rotate out of risk assets into safe havens, expecting the Federal Reserve to cut rates to avoid a recession,” explained Nicolas Trindade, a senior portfolio manager at Axa’s investment management division. He contrasted this situation with the tumultuous conditions of 2022, when both risk assets and sovereign bonds were simultaneously in decline.

The recent movements in Treasury yields highlight the enduring appeal of US government bonds as a secure investment option, even amidst the tumult fueled by Trump’s aggressive stance on international trade. This scenario has disproportionately affected US financial assets, making the upward trend in Treasuries noteworthy. Fraser Lundie, head of fixed income at Aviva Investors, remarked, “The return of a negative correlation between government bonds and risk assets is a welcome development,” noting that such a relationship had become increasingly rare in recent years. He emphasized that the 10-year Treasury yield dropping below 4 percent signals a significant shift in investor behavior.

Other traditional safe-haven investments have also shown resilience in this market climate. For instance, German 10-year yields have decreased by 0.09 percentage points this week. Meanwhile, Japanese bonds have seen an even more pronounced rally, with 10-year yields decreasing by 0.37 percentage points. Gold, which had experienced a peak in its value leading up to Trump’s tariff announcements, has since retraced slightly but remains a favored asset among cautious investors.

The administration in the United States is closely monitoring long-term borrowing costs, particularly the 10-year yield, as it sets a benchmark for global risk-free rates and influences overall debt costs throughout the US economy. Treasury Secretary Scott Bessent has expressed a keen interest in the trajectory of the 10-year yield. The significant rise in yields earlier this year had raised concerns about the sustainability of US debt, especially in light of the country’s substantial fiscal deficit. Speculation regarding a possible US government intervention in the Treasuries market, as part of a so-called Mar-a-Lago accord designed to weaken the dollar, has led to hesitance among investors. However, the administration has clarified that such an arrangement is not currently on the table.

Ultimately, the prevailing economic outlook has played a pivotal role in dragging Treasury yields and the dollar lower in recent weeks. Investors are increasingly cautious, weighing the potential implications of ongoing tariff disputes and the broader economic landscape.