The U.S Treasury Market Slides With the Biggest Selloff Since the Repo Meltdown in 2019

U.S. Treasury yields climbed sharply as government bonds continued their steep decline, heading toward what could be their worst weekly performance since 2019. The $29 trillion Treasury market has suffered a major selloff, with benchmark 10-year yields rising as much as 10 basis points on Friday, reaching their highest level since February. This latest increase even surpasses previous highs triggered by concerns over trade tariffs.

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As of Thursday’s close, Treasuries had dropped more than 2% for the week—marking their largest weekly loss since the repo market turmoil of September 2019, when liquidity dried up and forced the Federal Reserve to intervene.

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This week’s losses follow a volatile period for bonds, as President Donald Trump first announced sweeping global tariffs, only to roll back most of them shortly after. The abrupt shifts in policy created market instability, shaking investor confidence and casting doubt on the long-held perception of U.S. government debt as a safe haven. The uncertainty has triggered widespread selling of Treasuries and led some to question whether global investors may be turning their backs on U.S. assets altogether.

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The bond market turbulence has also prompted speculation about whether large hedge funds are facing losses on leveraged bets, or if foreign investors are accelerating their retreat from U.S. government debt. Kathy Jones, chief fixed-income strategist at Charles Schwab, emphasized that the real issue weighing on markets is a loss of trust in the direction of U.S. policy. “The abrupt changes in tariff policy have caused leveraged trades to come undone and sent buyers to the sidelines,” Jones explained.

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Supporting the theory of foreign pullback, the U.S. dollar experienced a steep decline this week—its biggest drop since 2022. That weakness in the greenback suggests overseas investors might be shifting their capital into more stable markets, such as Europe.

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According to Jones, the selling pressure on U.S. Treasuries could continue as long as uncertainty about government policy persists.

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The contrast between U.S. and European government bonds became especially apparent this week. While Treasuries faced significant losses, German bunds — considered Europe’s safest fixed-income assets — remained largely stable.

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Yields on German government bonds were mostly flat, as investors sought refuge from the volatility gripping U.S. markets. Meanwhile, the yield on the 10-year U.S. Treasury rose by more than 40 basis points this week.

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According to historical data, this marks the largest underperformance of Treasuries relative to bunds since at least 1989.

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The selloff continued into Friday, with yields on U.S. 7- and 10-year notes rising another 10 basis points. The 30-year bond also saw its yield edge toward 4.96% after briefly breaching the 5% mark earlier in the week for the first time since January. Since last Friday, the long bond’s yield has surged by about 50 basis points, reflecting just how intense the selloff has been.

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Despite the dramatic rise in yields, market participants are still betting that the Federal Reserve will begin cutting interest rates this year. Futures markets now suggest that at least three quarter-point rate cuts are expected by the end of the year, with a possibility of a fourth.

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This pricing indicates that investors are looking past the near-term volatility and anticipating that the Fed will be forced to respond to weakening economic conditions with a more accommodative stance.

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Still, in the short term, traders are grappling with a challenging environment. The selloff has brought into question the resilience of leveraged positions and the dependability of Treasuries as a global anchor in times of uncertainty. As investors digest the mixed signals from Washington — from fluctuating tariff threats to ongoing geopolitical risks — the demand for U.S. government debt has waned.

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In a broader context, this week’s bond rout reflects the delicate balance global investors are navigating. On one side are hopes for eventual rate cuts by the Federal Reserve, and on the other, the day-to-day unpredictability of U.S. economic and trade policy. Until greater clarity emerges from the White House and the Fed, the bond market may remain volatile.

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Overall, the dramatic losses in Treasuries this week underscore just how sensitive global financial markets remain to shifts in U.S. policy. For now, the stability once associated with U.S. government debt appears increasingly fragile — a sentiment that could drive more investors to seek safety elsewhere.

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