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Bloomberg Quint
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US Treasury Yields See Biggest Weekly Jump Since 2001 As Cash Flees
- US Treasury yields experienced the most significant weekly surge since 2001 as investors withdrew from US assets amid a bond-market selloff triggered by President Donald Trump's trade war.
- The rapid increase in the 10-year Treasury yields, rising to 4.49%, raised concerns about heightened borrowing costs impacting the broader economy.
- Uncertainty stemming from Trump's trade policies and the US economic outlook prompted investors to shift towards other assets like the Swiss franc, gold, and the Japanese yen.
- The volatility in US government debt markets led to a loss of confidence in US policy and raised doubts about Treasuries as risk-free securities.
- The escalating trade tensions also affected the dollar, reflecting a reduction in overseas investment in the US.
- Investors turned to European debt markets amid the turmoil, leading to a significant divergence between German and US Treasury yields, with US 10-year rates surging over 50 basis points.
- The surge in yields contradicted the Trump administration's goal of lowering long-term interest rates, prompting calls for Federal Reserve intervention to stabilize markets.
- Several analysts, including those from JPMorgan Chase, Deutsche Bank, Jefferies, and Goldman Sachs, suggested potential Fed actions such as quantitative easing or liquidity injections to address the situation.
- The chaos in the bond market indicated a need for Fed intervention to prevent further market disruptions and ensure financial stability.
- The sharp rise in Treasury yields and the bond selloff reflected concerns about the US deficit expanding if the economy slows down and Trump implements tax cuts.
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