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Trading in Treasuries experienced a decline on Friday, marked by increased volatility, as concerns grew over the $29tn US government debt market.
The 10-year Treasury yield surged by 0.19 percentage points to reach 4.58 per cent on Friday, reflecting a significant downturn for an asset traditionally viewed as a safe haven in the global financial system.
The yield later retraced some of its gains, settling at 4.48 per cent after remarks by Boston Fed President Susan Collins, who indicated that the US central bank stood ready to intervene to stabilize financial markets if necessary.
Investor confidence has been rattled by Donald Trump’s unpredictable tariff policies, leading to a flight from American assets. The 10-year yield recorded its largest increase since 2001, rising nearly 0.5 percentage points this week, according to Bloomberg data.
Although Trump recently backed off from imposing reciprocal tariffs on non-retaliating countries, opting for a 90-day pause with major US trading partners, he imposed even higher duties on Chinese imports.
Global pressure to sell Treasuries and corporate bonds has intensified, particularly among foreign holders, amidst uncertainty surrounding Trump’s policies, noted Peter Tchir, head of US macro strategy at Academy Securities.
Concerns have been raised about the lack of faith in the US bond market, with indications of abnormal market behavior and liquidity challenges exacerbating the situation.
Market depth, a key measure of the market’s ability to absorb large trades without significant price fluctuations, deteriorated significantly this week according to analysts at JPMorgan.
Liquidity was notably weak on Friday, with market depth running well below normal levels, leading to heightened sensitivity to market movements as noted by industry experts.
The day’s Treasury market volatility coincided with a decline in the value of the dollar, as major currencies such as Sterling, the Japanese yen, and the Swiss franc made significant gains against the greenback.