New York, Apr 12 (AP) The upheaval in stocks has been grabbing all the headlines, but there is a bigger problem looming in another corner of the financial markets that rarely gets headlines: Investors are dumping US government bonds.

Normally, investors rush into Treasurys at a whiff of economic chaos but now they are selling them as not even the lure of higher interest payments on the bonds is getting them to buy. The freak development has experts worried that big banks, funds and traders are losing faith in America as a good place to store their money.

“The fear is the US is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.” That could be bad news for consumers in need of a loan — and for President Donald Trump, who had hoped his tariff pause earlier this week would restore confidence in the markets.

What's happening? A week ago, the yield on the 10-year Treasury was 4.01%. On Friday, the yield shot as high as 4.58% before sliding back to around 4.50%. That's a major swing for the bond market, which measures moves by the hundredths of a percentage point.

Among the possible knock-on effects is a big hit to ordinary Americans in the form of higher interest rates on mortgages and car financing and other loans.

“As yields move higher, you'll see your borrowing rates move higher, too,” said Brian Rehling, head of fixed income strategy at Wells Fargo Investment Institute. "And every corporation uses these funding markets. If they get more expensive, they're going to have to pass along those costs customers or cut costs by cutting jobs.” Treasury bonds are essentially IOUs from the US government, and they're how Washington pays its bills despite collecting less in revenue than it spends.

To be sure, no one can say exactly what mix of factors is behind the developing bond bust or how long it will last, but it's rattling Wall Street nonetheless.

Bonds are supposed to move in the opposite direction as stocks, rising when stocks are falling. In this way, they act like shock absorbers to 401(k)s and other portfolios in stock market meltdowns, compensating somewhat for the losses.

“This is Econ 101,” said Jack McIntyre, portfolio manager for Brandywine Global, adding about the bond sell-off now, “It's left people scratching their heads.” The latest trigger for bond yields to go up was Friday's worse-than-expected reading on sentiment among US consumers, including expectations for much higher inflation ahead. But the unusual bond yield spike this week also reflects deeper worries as Trump's tariffs threats and erratic policy moves have made America seem hostile and unstable — fears that are not likely to go away even after the tariff turmoil ends.

“When the issue is a broader loss of confidence in the United States, even a much fuller retreat on trade might not work” to bring yields down, wrote Sarah Bianchi and other analysts at investment bank Evercore ISI. “We're not sure any of the tools remaining in Trump's toolkit will be sufficient to fully staunch the bleeding.” The influence of the bond market Trump acknowledged that the bond market played a role in his decision Wednesday to put a 90-day pause on many tariffs, saying investors “were getting a little queasy”.

If indeed it was the bond market, and not stocks, that made him change course, it wouldn't come as a surprise.

The bond market's reaction to her tax and budget policy was behind the ouster of United Kingdom's Liz Truss in 2022, whose 49 days made her Britain's shortest-serving prime minister. James Carville, adviser to former US President Bill Clinton, also famously said he'd like to be reincarnated as the bond market because of how much power it wields.

The instinctual rush into US debt is so ingrained in investors it even happens when you'd least expect.

People poured money into US Treasury bonds during 2009 Financial Crisis, for instance, even though US was the source of the problem, specifically its housing market.

But to Wall Street pros it made sense: US Treasurys are liquid, stable in price and you can buy and sell them with ease even during a panic, so of course businesses and traders would rush into them to wait out the storm.

Yields on US bonds quickly fell during that crisis, which had a benefit beyond cushioning personal financial portfolios. It also lowered borrowing costs, which helped businesses and consumers recover.

This time that natural corrective isn't kicking in.

What's causing the sell-off? Aside from sudden jitters about the US, several other things could be triggering the bond sell-off.

Some experts speculate that China, a vast holder of US government bonds, is dumping them in retaliation. But that seems unlikely since that would hurt the country, too. Selling Treasurys, or essentially exchanging US dollars for Chinese yuan, would make China's currency strengthen and its exports more expensive.

Another explanation is that a favoured strategy of some hedge funds involving US debt and lots of borrowing — called the basis trade — is going against them. That means their lenders are asking to get repaid and they need to raise cash.

“They are selling Treasurys and that is pushing up yields — that's part of it,” said Mike Arone, chief investment strategist at State Street Global Advisors. “But the other part is that US has become a less reliable global partner.” Wells Fargo's Rehling said he's worried about a hit to confidence in the US, too, but that it's way too early to be sure and that the sell-off may stop soon, anyway.

“If Treasurys are no longer the place to park your cash, where do you go?,” he said. “Is there another bond out there that is more liquid? I don't think so.” (AP) SCY SCY

Safe-haven erosion in US Treasurys risks higher borrowing costs and broader financial market instability. A sudden sell-off in US Treasurys has raised concerns that the bonds are losing their safe haven status, driving yields sharply higher and transmitting increased borrowing costs to consumers and corporations; causes cited include weaker consumer sentiment raising inflation expectations, perceived policy unpredictability linked to trade and tariff actions, and technical liquidations such as forced closure of basis trades, all of which amplify sales and threaten the traditional stabilising role of Treasurys.