Treasury Yields Face Scrutiny Amid Global Market Uncertainty

Treasurys Under the Microscope

Recent turbulence in global markets and rising uncertainty around US economic policies have put the reliability of US Treasurys back in the spotlight, per GlobeSt.

While traditionally seen as a go-to asset in times of instability, recent swings in bond yields and foreign holdings suggest that assumption may not be as ironclad as once believed.

A sharp move in the 10-year Treasury yield—from 4.01% on April 4 to 4.48% just a week later—was described by The New York Times as the steepest weekly spike in nearly 25 years. Such volatility has prompted investors to question whether US debt still carries the same safe-haven cachet it once did.

Auction Signals Strength—For Now

Despite the market jitters, demand for Treasurys remains robust. At last Wednesday’s $39B auction of 10-year notes, buyers accepted a yield of 4.435%, slightly below expectations, and indirect bidders—including foreign central banks—took up 87.9% of their allotments, far surpassing the 70% average.

By the following Monday, yields had moderated slightly, suggesting that fears of a long-term selloff may be premature. “In any market, there’s going to be hysteria, there’s going to be fundamentals, and there’s going to be speculation,” said Giacomo Santangelo of Fordham University. “Unfortunately, we have to wait until afterward to see what happened.”

Foreign Flows Paint a Mixed Picture

Foreign appetite for Treasurys remains strong in aggregate, but not uniformly. As of January 2025, total foreign holdings of US debt had risen 7.2% year-over-year, to $572.7B. However, the makeup of that demand is shifting.

• Japan (largest holder): Cut holdings by $61.3B (-5.4%)
• China (second largest): Reduced by $36.9B (-4.6%)
• Canada: Down $500M (-0.1%)
• UK: Increased by $38.4B (+5.5%)
• Luxembourg, Cayman Islands, and Belgium: Combined increase of $223.1B

These shifts suggest diversification within the buyer base, even as geopolitical concerns continue to affect individual nations’ exposure to US assets.

Global Alternatives Fall Short

While Germany’s AAA-rated 10-year bond offers a theoretical alternative, it closed Monday at a yield of just 2.51%—well below US Treasurys. Though Germany plans to boost borrowing for defense and infrastructure, its bonds lack the scale and liquidity of US debt markets, making them a less practical replacement.

The Dollar and the Broader Landscape

The dollar index (DXY) remains elevated, opening Monday at 100.10 despite a broader downward trend since early January. Though not immune to political and economic uncertainty, the greenback continues to hold value in global trade and investment, bolstering Treasurys’ position by association.

Why It Matters

The debate over Treasurys’ safe-haven status isn’t just academic—it has real consequences for US borrowing costs, foreign policy leverage, and overall economic stability. So far, the data points to resilience rather than retreat. But with policy shifts and geopolitical realignments in play, the long-term picture is still forming.

As Santangelo put it, “That’s what creates the bumps on the roller coaster.”

What’s Next

With uncertainty as the only constant, investors will continue watching auction results, foreign flows, and policy shifts for signs of a broader trend. Whether Treasurys retain their top-tier status or gradually cede ground remains to be seen—but for now, they’re holding firm amid the storm.