When the financial underpinnings of society give a hiccup, it’s time to stop and sniff the coffee.
Trouble is brewing in the world of U.S. Treasury bonds, prompting concern among investors and some Washington policymakers.
U.S. Treasury bonds are a key pillar of the global financial system, but there are signs that the pool of interested buyers could be in danger of drying up as an unintended consequence of rising U.S. interest rates.
For now, no one is panicking. But the market for U.S. Treasury bonds has lately displayed a level of volatility not seen since the beginning of the pandemic-related crisis in 2020, when the Federal Reserve cut interest rates to zero and went on to buy $1 trillion of treasuries and other financial assets to keep the global financial system functioning. [WaPo]
It’s not mentioned in the article, but you have to wonder if the potential takeover of all, or parts of, Congress by the Republicans are giving investors in American Treasury bonds pause. After all, it’s no secret that the House, if controlled by the Republicans, has threatened to not lift debt ceilings. If these investors, often foreign and savvy, are realizing that the Republicans are fourth raters who would likely implement their threats, they may come to the conclusion that exposure to American Treasuries that may fail is not in their best interest.
