In the world of money, American bonds have always been associated with the meanings of safety and stability, and the first option for investors was in times of crisis and fluctuations.
But recently, this scene changed remarkably.
The controversial political decisions and conflicting economic indicators have prompted the erosion of confidence in this “safe haven”, causing large -scale sale waves in American assets and a rise in returns, amid an escalating concern about the future of the American economy.
In this article, we will simply review and center the most important reasons behind this remarkable shift in the American bond market, and we also highlight the repercussions of the continuation of this trend over the American and global economy.
The reasons for the high bond returns?
1- Customs definitions … the beginning of the spark
US President Donald Trump’s announcement of the imposition of new customs definitions a decisive turning point in the market, as investors considered it a clear indication of the trend towards economic closure, which threatens high costs and accelerating the pace of inflation.
2- Targeting the pillars of state stability
Since the administration of President Donald Trump took power, American policy has witnessed radical changes, especially at the economic and international levels. A number of principles and columns have been retracted that has long been the main pillars in the development of the American state and expanded its influence globally, such as freedom of trade, respect for international agreements, attracting competencies and migrants, and enhancing cooperation with traditional allies.
This sudden shift in strategic trends has sparked widespread concern in the investment circles, sending negative references to global markets on the extent of the United States’s ability to maintain its economic and political stability.
The beating of these pillars was a deep concern for financial markets and investors, local and international alike, as it contributed to deepening the uncertainty, and the weakest confidence in the continuity of American policies in the long run.
These concerns were reflected in a remarkable movement of investors towards leaving the American stock, bond and dollar market, which led to a significant increase in government bond returns, which is a direct indication of the escalation of the risk level, and the decline in confidence in the United States’s ability to fulfill its financial obligations, even in the long term, in a scene that has not been repeated for decades.
https://www.youtube.com/watch?v=r1jul9m4gqs
3- Inflation knocks on the gates of the economy
Every increase in definitions leads to high prices of commodities, which raises the costs of living, and this increase presses consumers and investors, which causes investors in bonds to demand higher returns to compensate for the loss of purchasing power due to inflation.
4- Raise interest and influence on bonds
When inflation rises, the market expects the American federal to take a step to raise interest rates in order to contain this inflation.
As interest increases, old bonds with low returns become less attractive and solve this dilemma, the prices of old bonds in the market decrease to make their returns in line with interest, which leads to an increase in returns on old bonds and raised the value of the return on the newly released bonds.
5- Rawds waving on the horizon
High prices, purchasing power decline and increased interest rates as a result of commercial policies and customs tariffs, in addition to the possibility of companies ’revenues decrease and the high cost of borrowing, are all indicators that threaten a possible economic recession, and this threat enhances the risks of American bonds, which leads investors to demand higher returns, which also leads to raising the cost of borrowing and increasing pressure on the American economy.
6- Loss of confidence in the decisions of the American administration
Investors have lost confidence in the stability of US policies under President Trump’s management, as sudden change has become the base, and this feeling of uncertainty has led many of them to get out of the bond market, and even from American assets, in search of more stable and volatile markets.
7- Group selling and losing American assets
The American markets witnessed a state of collective sale that were not limited to shares only, but also extended to the bonds, which were considered a safe haven, as well as the dollar, and this warns of losing confidence in the American economy and increasing fears of the future in light of the mystery of the current scene.
There is a disturbing paradox, as the returns rise and the dollar is declining, while in the natural conditions, the high returns of bonds means usually means the strength of the dollar. In fact, the scene is completely different.
What does this mean? It means that investors no longer trust bonds or even in the American currency itself.
It is not just a search for profits, but an escape from a risk waving on the horizon.
8- High fluctuations .. and bonds pay the price
Large fluctuations in the market and the uncertainty in a noticeable shift in investor evaluation of the American economy, as they became demanding high returns on American bonds to compensate for the increasing risks.
But this height in returns imposes a great pressure on the American budget, both at the present time or in the future.
A state of fear dominates the markets
Fear in the markets is prepared, and with the absence of decisive decisions from the American administration, the state of panic escalated, and the sales waves expanded to include stocks, bonds and dollars, which deepened financial turmoil.
- Are these reasons still standing?
The answer is “Yes”
- What does the continued increase in returns on American bonds mean?
The high returns of American bonds is not a gain for investors, but also an increasing financial burden on the US government.
Every point in returns is translated into billions of additional dollars that are paid as benefits on public debt, which exceeded $ 36.2 trillion until February 2025.
- The current cost of American debt
Today, the United States is paying more than one trillion dollars annually as benefits on its debts, with an annual increase of $ 240 billion.
As this upward trend continues in the returns, the financing of debt becomes more expensive, which presses the federal budget and threatens economic stability in the short and medium term.
If this trend continues without curbing, the expected result will lead to:
- Huge pressure on the federal budget, which will force the government to reduce spending in basic sectors such as education, health care, defense, and social security.
- The threat of internal financial stability, the possibilities of a long government closure may increase as a result of a deficit in passing budgets, as happened in the 2011 and 2013 crises.
- A possible reduction in credit rating, as the classification institutions may reconsider the creditworthiness of the United States, raising the cost of borrowing more.
- Direct effect on the American citizen; The rise in returns is translated into a rise in the prices of services provided by the state and the high interest rates on real estate loans, car financing, and even credit cards, which weakens the purchasing power of Americans.
https://www.youtube.com/watch?v=Pdyhkxhuon4
What is the size of the American bond market and its most important holders?
The size of the American bond market reached 8.5 trillion dollars, and it represents approximately 23.5% of the total American debt.
The 10 most important campaign for American bonds
According to the data of the US Treasury, this list of the most important American bond campaign in the world:
- January 2024: 1140.6 billion dollars
- January 2025: 1079.3 billion dollars
- January 2024: 797.7 billion dollars
- January 2025: 760.8 billion dollars
- UK
- January 2024: 701.8 billion dollars
- January 2025: 740.2 billion dollars
- January 2024: 348 billion dollars
- January 2025: 409.9 billion dollars
- January 2024: 327.9 billion dollars
- January 2025: 404.5 billion dollars
- January 2024: 293.1 billion dollars
- January 2025: 377.7 billion dollars
- Canada
- January 2024: 351.3 billion dollars
- January 2025: 350.8 billion dollars
- January 2024: 256.4 billion dollars
- January 2025: 335.4 billion dollars
- January 2024: 334.6 billion dollars
- January 2025: 329.7 billion dollars
- January 2024: 284.2 billion dollars
- January 2025: 301.1 billion dollars
The most important campaign for American bonds from Arab countries
According to the US Treasury and Reuters Agency, Saudi Arabia is signing, and then the UAE, then Kuwait, on the list of the largest American bond owners from Arab countries:
- Saudi Arabia: 126.9 billion dollars
- The UAE: 92.6 billion dollars
- Kuwait: 49.2 billion dollars
Important information about American bonds
- The United States must re -financing $ 8 trillion bonds and put them on the market before the end of 2025.
- It must also issue new bonds with a dollar to finance the budget deficit before the end of 2025.
How much is the American debt?
- The value of the American public debt was 36.2 trillion dollars at the end of February 2025
- The American debt increased by 85.5% during the last 10 years.
- The value of American bonds constitute approximately 32% of GDP.
- The value of the general American debt reaches 123% of GDP.
American religion structure according to the creditors
- American investors and other investors: commercial banks, insurance companies, asset management companies, individual investors, pension funds, major companies, local bodies and state governments, and they are accounted for 19.7 trillion dollars and represented 56% of the total American debt.
- Foreign (foreign) investors: they account for 8.5 trillion dollars and represent 24% of the total American debt.
- Social Insurance Agency and other government agencies: It accounts for $ 2.4 trillion and represents 7% of the total American debt.
- The US Central Bank: It accounts for $ 4.7 trillion and represents 13% of the total American debt.
The repercussions of the American bond crisis on the global economy
- Costumes for bond holders from countries and investors
When the value of American bonds decreases as a result of market turmoil, these countries and investors will pay losses, especially with the decline in market confidence in the American economy.
How does the value of American bonds decrease the reserves of some foreign countries?
- First: What is the relationship of bonds to the cash reserve?
Many countries maintain a large part of their foreign reserves in the form of American treasury bonds, because they are considered a safe and easy to liquefy (converting to criticism when needed).
- Second: What happens when the value of the bonds decreases?
When the returns of American bonds rise, the price of existing bonds decreases (the opposite relationship), which means:
- If a country had not previously purchased bonds with a low return, its market value is now less.
- If the state re -evaluates the value of its bond portfolio, a loss of value will appear.
- This loss records a decrease in the total foreign reserve, because the bonds are counted within foreign origins.
- The state’s ability to hold the bond will restrict the possibility of selling due to the low value of the bond, if desired to sell before the entitlement date.
- Reducing foreign reserves in those countries.
- The possibility of reducing its possession of American bonds in the future as it may exacerbate the crisis.
If China has US bonds of one trillion dollars (dollars), and has suffered from a 5% decrease in its market value as a result of the high returns, then this will lead to a loss of about $ 50 billion in its foreign exchange reserves if it tried to liquidate its bonds at the same time. This loss is not a direct cash loss, but rather a loss of market value (Market Value) of reserve assets, but if China keeps bonds until the date of its entitlement, it will not lose the nominal value.
A liquidity crisis in emerging markets
Investors rush to the high American returns are chasing a liquidity crisis in emerging markets:
- It raises borrowing costs
- Freezing development projects
- Increases the risk of financial stumbling and economic turmoil in these countries.
Fluctuations in currency rates in a way that causes harm to many countries
- The prevalence of economic infection accelerated
If investor confidence in the United States’s ability to deal with its debts collapses, then::
- Global markets will suffer from a rapid funding of money
- Sharp declines
- Financial institutions will face great dangers as a result of their exposure on American bonds.
The future of the economy and the American bond market?
The movements of the American bond market are no longer interpreted only through traditional economic indicators, but also became a direct hostage to the White House resolutions, and the directions of the American administration in barbed files such as trade, taxes, public debt and international policy in addition to state reactions to American policies, which was not in the past.
With these policies continuing unchanged, and with the absence of radical financial reforms, the absence of factors of stability from the American markets, the returns remain in an upward path, amid wide sales of American assets, which doubles fluctuations in the market and put tremendous pressure on the federal budget.
This scene vowed a more complicated internal religion crisis than its predecessors, with realistic possibilities for a long government closure as happened in the 2011 and 2013 crises, but in a more fragile circumstance.
There are also players on the international scene with the opportunity to obtain their share of American influence in a new world with rules and its foundations now.
Unless the American administration changes its economic, commercial and political directions, it will face huge losses and costs and the bounces of this crisis will not be limited to the scope of the American economy only, but will also affect the global economy that entered the stage of fear and blurry.
