US Treasuries Get a Confidence Knock

By: Anneken Tappe · November 16, 2023 · Reading Time: 2 minutes

Not-So-Safe Haven?

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.

Jury’s Out

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.

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