The David Rubenstein Show: Steven Mnuchin
Former US Treasury Secretary Steven Mnuchin said he likes the idea of an across-the-board 10% duty, but markets need clarity and understanding. In an episode of "The David Rubenstein Show: Peer to Peer Conversations," Mnuchin explains that he anticipates lower interest rates next year and is predicting 'about 4% 10-year Treasuries.' Mnuchin, who worked under President Donald Trump during his first term, describes the debt ceiling as an important mechanism and hopes that the Trump focuses on social security reform in the second half of his term. This interview was recorded March 5 at Bloomberg Invest in New York. (Source: Bloomberg)
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U.S. Treasurys may be losing their safe-haven status — and these bonds could take their place
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Canadians snapped up U.S. debt in April despite Trump's tariffs, but the bond selloff tanked its value
April's massive bond selloff didn't stop Canadians from buying Treasuries, but it weighed heavily on the value of their holdings. Higher interest rates in the U.S., where the Federal Reserve has been much more patient to cut interest rates than other central banks, have likely spurred demand. Canadians have been ditching all-things American after having enough of U.S. President Donald Trump's threats about tariffs and making their country the '51st state.' Boycotts of U.S. products from whiskey to dog food to Teslas—and a huge pullback in travel across the border—haven't stopped Canadian investors from buying Uncle Sam's debt, though. Trump's chaotic tariff rollout in April marked the high point of the 'Sell America' trade as stocks, bonds, and the dollar all sank. But despite the turmoil in fixed-income markets, Canadians purchased a net $9.2 billion of U.S. government bonds in April, the biggest monthly surge since November 2023. 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The example of Canada, the seventh-largest owner of U.S. debt, illustrates why this approach is shortsighted, however. After all, Canadian investors bought more Treasuries in April, even as the total value of their holdings declined after revaluing the bonds at current market prices. The big drop suggests America's northern neighbor has heavy exposure to long-dated Treasury notes and bonds, which are much more volatile than short-term Treasury bills. 'Valuation changes often move in the opposite direction of net U.S. sales/purchases and are often large enough to drive overall changes in holdings,' Fed economists wrote last year. 'As such, changes in holdings alone are an unreliable measure of cross-border demand for U.S. or foreign securities.' Foreign investors account for roughly 30% of the U.S. Treasury market, according to Apollo chief economist Torsten Sløk, and their behavior is being closely monitored as the Trump administration pushes for big shifts in global trade and international finance. The U.S. borrows at much better rates than its underlying finances would normally allow, thanks to the dollar's status as the world's reserve currency and confidence that America will always pay its bills. If foreign buyers sour on U.S. Treasuries, however, that could force the Treasury to pay higher yields to bring back buyers. Such a move would put upward pressure on interest rates for mortgages, small-business loans, and other common types of borrowing throughout the economy. Foreign investors held just over $9 trillion worth of Treasuries at the end of April, down only slightly from the record set in March. The decline in the dollar this year, Haworth said, has been much more pronounced than any offloading of Treasuries. That makes sense, he added, because a slowdown in trade affects the flow of dollars first as greenbacks are used in fewer transactions. Changes in the allocation of Treasuries, often held as investments or bank reserves, happen much more slowly. 'There's probably still some fundamental pressure as we suss out where trade and tariffs end up,' he said. The Treasury data from April showed foreign private investors were net sellers of long-term U.S. debt. Government institutions like central banks and sovereign wealth funds were net buyers. More current data suggests the latter trend may have reversed in the months since, though. Holdings by these official entities in the custody of the New York Federal Reserve have declined by $48 billion since late March, prompting Bank of America credit strategists to suggest that 'cracks' in demand from these investors are now visible. Still, it doesn't seem foreigners are dumping U.S. debt just yet. Even angry Canadians. This story was originally featured on
