Alarm bells ringing on Treasuries: yields soar to 4.50 per cent
Alarm bells ring for Treasuries, the US government bonds hitherto regarded as a safe haven in times of market turbulence. In recent days, yields on ten-year US bonds have suddenly risen
2' min read
2' min read
Alarm bells went off on Treasuries, the US government bonds hitherto considered a safe haven in turbulent market phases. In recent days yields on ten-year US bonds have risen suddenly, rising from 3.95 per cent to 4.50 per cent this morning, before retracing in the afternoon. Sales also affected European government bonds, with ten-year BTp yields rising in a few days from 3.70 per cent to 3.90 per cent.
A sign of tension and distrust in the most liquid financial instrument on the planet. Analysts are questioning the causes of this surge and above all the origin of the massive sales.
The technical explanation
.A more technical explanation points to the closure of so-called 'basis trade' positions, financial transactions carried out by hedge funds that exploit price differences between Treasuries and their futures contracts. By reducing risk and exiting these trades, hedge funds sold Treasuries, putting markets under pressure.
The political explanation
A second, more political explanation sees in the sharp rise in yields during the Asian trading day the possibility of China dumping most of its US bonds.
China is the second largest foreign holder of US debt: it held $761 billion in Treasuries in January. Japan is the largest foreign holder with $1.08 trillion.
