Investors have traditionally viewed U.S. Treasury securities as the ultimate safe haven investment, flocking to them in times of uncertainty. When the going gets tough, investors trust debt backed by the U.S. government. So is that changing?
Downgrades and Doubts
Here are some of the factors at play.
The Federal Reserve’s rate hikes have sent U.S. government bond yields up and prices down, making it more expensive for the government to borrow. Along with that, a soaring deficit, and the recurring threat of a government shutdown have caused some investors to second-guess U.S. Treasury securities as a safety play.
And investors aren’t the only ones with questions. Earlier this week, ratings agency Moody’s lowered the U.S. credit outlook to “negative” for exactly the reasons described above.
Recent bond auctions for 30-year treasuries have experienced weaker-than-expected demand. This is a sign that investors may be doubting the U.S. government’s ability to meet its long-term financial obligations.
On the other hand, investors could simply be focusing on other, riskier assets, as the U.S. economy has proven strong in the past months. If recessionary concerns crop back up, they may lean on the classic safe haven once again.
Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.