US Treasury market's 'new world order' brings fear of the long bond

Bond buyers question haven status of govt debt, seek higher yields on longer maturities

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NEW YORK - The "Sell America" trade that gripped markets in April has left a potentially lasting dent in investors' willingness to hold the US government's longest-maturity debt, a mainstay of its deficit-financing toolkit.

For bond managers at BlackRock, Brandywine Global Investment Management and Vanguard Group, the problem is that as US President Donald Trump approaches his 100th day in office, he has generated a growing list of unknowns, forcing traders to focus on a broad array of issues beyond just the likely path of interest rates.

To name a few: What do Mr. Trump's trade war, tax-cut agenda and scattergun policymaking mean for already weakening economic growth, sticky inflation and massive fiscal shortfalls? Will he again threaten to fire US Federal Reserve chairman Jerome Powell? Is he actively seeking a weaker dollar?

The result is a heightened notion of risk that is leading bond buyers to question the traditional haven status of US government debt and require higher yields on longer maturities. By one measure, that added cushion, which traders dub the term premium, is around the highest since 2014.

"We're in a new world order," said Mr. Jack McIntyre, who with his team oversees US$63 billion (S$82 billion) at Brandywine. "Even if Trump back-pedals on the tariffs, I think uncertainty levels are still going to be elevated. So that means term premium stays elevated."