By coinnews 
00:00 Speaker A
As President Donald Trump’s trade war heats up, the status of U.S. Treasuries as the world’s safe haven is increasingly coming into question. Yields, especially on longer-term debt, they have surged in recent days while the dollar has plunged. Here to break down some of the market action, we’ve got Yahoo Finance’s Alexandra Canal. What are we even tracking?
00:16 Alexandra Canal
Yeah, guys, we were just talking about it. These moves in bonds have been so, so confusing. Bond prices and yields, they’re inversely correlated. So you would think that a lot of people would be buying bonds to hedge against all of this uncertainty, to hedge against a lot of these recession risks, but instead, we’re seeing bonds aggressively sell off. And if we take a look at the 10-year note, we are up nearly 10 basis points. We’re trading at around 4.49%. This is actually higher compared to where we were trading on Wednesday, and it represents about a 62 basis point swing from the lows on Monday. So just incredible. There have been a few catalysts as to why, floating around on Wall Street. One is a potential unwinding of the basis trade. There’s about $1 trillion tied into that trade. That’s a highly leveraged trade, usually used by hedge funds. It could be that. It could be the fact that investors just want to unload bonds, keep some liquidity, have some cash, especially during these uncertain times. Or it could be foreign buyers unloading their own bonds. About 30% of bonds are exposed to those foreign buyers. You think about Japan, that’s one of the largest holders of our debt. China is also a big buyer. So perhaps there’s some of that. And really, strategists and analysts that I’ve been speaking with have said it could be a combination of all three. I did have the chance to talk to Kathy Jones. She’s a chief income strategist at Charles Schwab, and she told me that there’s a potential for bonds to maybe hit 5%. She said that’s the extreme case. She sees bonds coming back down to around 3.8% over the long term, perhaps over the next six months. But the more volatility that there is in this market, the more chaos that we’re seeing from this tariff whipsaw from President Trump, the more you’re going to see this reaction in the bond market.
02:35 Speaker A
And Allie, we got to head to our next guest, but important to note for our viewers that the bond market is really what moved the president this week. There was kind of a showdown with the bond nerds convincing the president to move the needle on his tariff policy. So really important week to continue to watch the bond market. Allie, thank you so much. Appreciate it.