Perils in the Treasury market have become more acute in the last several years, but they have always been there.
Practically every financial meltdown or crisis can be traced back to a misunderstanding of which assets are “risk-free.” Investors think they have a risk-free asset — it could be a mortgage-backed security, shares in a Bernie Madoff fund, Greek debt — and are surprised when it turns out not to be.
For the last several years, the term has been used a lot to describe one of the most widely traded securities in the world: US Treasuries. The markets for 10- and 30-year government bonds experienced more volatility this month in response to uncertainty around tariffs and the future of the world financial order. Rising yields and falling prices amid market turmoil suggest markets no longer see Treasuries as a “safe haven” (another favorite two-word description). Treasuries, which have long held a special place in the global financial system because of their ubiquity and liquidity, may be less special in the future.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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