Uncle Sam's Debt Offers Flimsy Refuge To Investors

2025-02-10 01:26:00 ET

Summary

• Yields on 10-year government debt have dropped in recent weeks amid signs of slowing growth and investors’ reflexive flight to safety following President Donald Trump’s tariff talk.
• Blown-up deficits, a major trade war, and something going haywire in tech tycoon Elon Musk’s forceful takeover of U.S. government payment systems all introduce major and sometimes opposing risks, making the future direction of yields hard to predict.
• Republicans in Congress are considering ways to finance up to $8 trillion in tax cuts, which could boost economic activity but also add to long-term U.S. borrowing needs when the Federal Reserve’s policy rate is already above 4%.

Originally published on February 7, 2025

By Breakingviews

U.S. government bond markets are feeling the squeeze from all sides. Yields on 10-year government debt have dropped in recent weeks amid signs of slowing growth and investors’ reflexive flight to safety following President Donald Trump’s tariff talk. But buyers should beware a false sense of security: blown-up deficits, a major trade war, and something going haywire in tech tycoon Elon Musk’s forceful takeover of U.S. government payment systems all introduce major and sometimes opposing risks, making the future direction of yields hard to predict. The only guarantee is volatility....

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