A growing cohort of institutional investors is actively reducing exposure to long-dated US Treasury bonds, driven by mounting concerns over the coherence of US fiscal and monetary policy.
The sell-off reflects a broader shift in market sentiment, with traders increasingly pricing in a 'debasement trade'—a strategy predicated on the expectation that US sovereign debt will underperform due to structural inflation risks and policy uncertainty.
The market repricing has been exacerbated by recent public interventions from top officials.
Federal Reserve Chair Kevin Warsh’s continued emphasis on an inflation-focused mandate has clashed with Treasury Secretary Scott Bessent’s diplomatic engagements in Japan, which markets interpret as attempts to manage foreign demand for US debt.
This divergence has eroded confidence in the stability of the US bond market, pushing yields higher as investors demand greater compensation for perceived policy risk.
Since the onset of the 'Liberation Day' market regime in April 2025, the narrative that US Treasuries are no longer the world’s premier safe-haven asset has gained traction.