Investors are selling off bonds from the U.S. government, as part of a trade known as “Sell America.”

The United States government has had to pay more to borrow in the global debt markets. On Wednesday, the Treasury department found that there was tepid demand for an auction for $20 billion worth of bonds, and ended up paying a slightly higher interest rate (or yield) than expected.

This has spooked markets. Yields on 30-year U.S. Treasuries have spiked above 5% this week — an unusual, and unsettling, surge in the price that the U.S. government pays on its long-term debt. An increase in bond yields is particularly damaging to the economy because it jacks up the interest rates on many things that consumers pay, such as on mortgages and other loans.

  • greybeard@lemm.ee
    61·
    1 day ago

    People will be less interested in long term bonds that have a yield lower than the current rates. This makes those old bonds less valuable as people scramble to get the bonds with higher yield. Why loan the government money at 3% if you can be guaranteed 5%?

    If you want to stay in bonds and you believe the US will need to keep raising rates to convince people to buy US debt, you can buy very short term bonds. STIP (which is an ETF) for example are very short term bonds so you can keep getting the higher rates.

    So if you think that Trump will continue to do things that reduce faith in the stability of the US government then yes, dump the bonds.