Normally, investors rush into Treasurys at a whiff of economic chaos but now they are selling them as not even the lure of higher interest payments on the bonds is getting them to buy. The freak development has experts worried that big banks, funds and traders are losing faith in America as a good place to store their money.
“The fear is the U.S. is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.”
That could be bad news for consumers in need of a loan — and for President Donald Trump, who had hoped his tariff pause earlier this week would restore confidence in the markets.
I agree on how yield curves work. My point is that issuing bonds are not necessary to begin with. It is completly voluntary on the part of Congress. It is purely a political choice that the Treasury must issue bonds approximately equal in amout to the budget deficit. The bonds are not used for financing the government, as it is able to issue the currency it spends, but rather as a drain on reserves in the baking system to help the Fed reach its interest rate target.