The world’s collective sigh of relief Wednesday afternoon — when President Donald Trump declared a 90-day pause on much of his administration’s tariff agenda — belies a quieter, deeper fear among some lawmakers: U.S. Treasuries may be at risk of losing their preeminent status as a “safe haven” for investors around the globe.
We’re not there yet, to be clear. A closely watched auction of 10-year Treasuries on Wednesday saw surprisingly strong demand right before Trump’s pause was announced. And yields retreated somewhat following the afternoon’s historic rally in the U.S. stock market.
But some lawmakers fear the still-elevated yields paid by the U.S. Treasuries signal a weakening faith in the world’s ability to park money safely in U.S. government bonds and, in general, invest in American markets.
“I think any of our trading partners would be guilty of malpractice if they don’t factor this in any kind of future business relationships.” Sen. Thom Tillis (R-N.C.) said Wednesday night.
Sen. Ron Johnson (R-Wis.), when asked about the bond market, was succinct. “Nobody likes seeing this level of disruption. Stability is good for business,” Johnson said.
Market watch: Multiple Republicans told us they were closely watching bond markets on Wednesday and were aware of the fears about what rising yields may have been saying about U.S. governance.
“I heard some of the theories this morning – more so than when the markets bounced back after the freeze,” Rep. Scott Fitzgerald (R-Wis.) said last night.
“We’ll see what happens to the 10-year Treasury,” Sen. John Kennedy (R-La.) said shortly after the pause was announced. “My guess is, this will be very much a positive. The only way you can judge investors’ sentiment is to watch what they do.”
Democrats’ feelings here will not come as a surprise. Trump has “proven that he is willing to make changes to the rules that make no economic sense at all. That undermines investor confidence at a core level,” Sen. Elizabeth Warren (D-Mass.) said.
“What Trump is doing, even if he’s stopped at this minute, has done incalculable damage to our economy,” Warren added.
Make policy great again. Plenty of GOP lawmakers remain publicly upbeat on the president’s approach. Several said investors simply needed to see Trump’s economic agenda come to full fruition – a combination of tax and crypto reforms with a nice dollop of deregulation.
“Reconciliation and the budget resolution – obviously, passing that in the House and being able to move forward, I think, would give people even greater certainty about tax structure and other things moving forward,” Sen. Katie Britt (R-Ala.) said.
Other GOP lawmakers pointed to recent action in the House and Senate to advance stablecoin reforms, which proponents have said could shore up the role of the U.S. dollar abroad.
“The U.S. dollar is the world reserve currency,” Sen. Bernie Moreno (R-Ohio) said. “We’re gonna make that even more of a factor with our stablecoin bill. That’s a big part of solidifying the dollar as the world reserve currency.”
