Have US bonds and the dollar lost their 'safe haven' status amid tariff fallout?

A sharp sell-off in US government bond markets and the dollar has set off fears about the growing fallout from President Donald Trump's tariffs, raising questions about what is typically seen as the safest corner for investors during times of turmoil.

- Colby Smith

Yields on 10-year Treasuries — the benchmark for a wide variety of debt — whipsawed on April 9 after Mr Trump paused the bulk of the tariffs he had threatened the week before and raised the rates charged on Chinese goods after that country retaliated. The reversal sent US stocks soaring.

Bond prices and yields move in opposite directions. If demand for a bond increases, pushing up its price, it is now more expensive for a potential new investor to buy.

The bond's yield will then fall because the return an investor expects from purchasing this bond is now lower.

After Mr Trump's April 9 announcement, the 10-year bond yield traded at 4.35 per cent, slightly lower than earlier in the day but still well above recent levels.

Just a few days ago, it had traded below 4 per cent. Yields on the 30-year bond reversed an earlier rise that had lifted it above 5 per cent. It now stands at 4.74 per cent.

Selling intensified for short-term government bonds, with the two-year yield surging nearly 0.2 percentage points to 3.9 per cent.

Amid the tumult, other markets considered alternative safe havens to the US have gained.

Yields on German government bonds, which serve as the benchmark for the eurozone, fell on April 9, indicating strong demand. Gold prices rose, too.

The US-centric volatility comes on the heels of investors fleeing riskier assets globally in what some fear had parallels to an episode known as the "dash for cash" during the Covid-19 pandemic when the Treasury market broke down.

The recent moves have upended a longstanding relationship in which the US government bond market serves as a safe harbour during times of stress.