Treasury Turbulence: U.S. Bond Market in Crisis

The U.S. Treasury market faces a crisis as tariffs and forced selling prompt a significant selloff, resulting in soaring yields. Rising borrowing costs are affecting the global economy, pushing central banks to respond. Hedge funds, facing liquidity challenges, have contributed to the volatility.

The U.S. Treasury market, a cornerstone of the global financial system, is facing a severe crisis as fresh selling pressure hit on Wednesday. This move indicates that investors are shedding their typically safest assets in response to the turmoil triggered by U.S. tariffs which is leading to a liquidity-driven sell-off.

This week, ten-year Treasury yields surged by 39 basis points to reach 4.38%, marking the biggest weekly jump since 2013 if sustained. The selloff in the $29 trillion Treasury market is elevating borrowing costs internationally, thereby pressing central banks and policymakers to expedite measures to protect economies from a steep slowdown prompted by the highest U.S. tariffs seen in over a century.

Japan is coordinating with the Group of Seven and the International Monetary Fund to stabilize the market turmoil, said the nation's top currency diplomat. Meanwhile, the rising U.S. rates echo across major global markets as Japanese and British long-term bond yields reach multi-decade highs, contrasting with the stable German 10-year bonds.

(With inputs from agencies.)