Safe Havens May Not Be
Also the basis trade, potential tariff lawsuits, AI market manipulation and no Exxon shareholder proposals.
For as long as I can remember, US Treasury bonds have been the world’s preeminent safe-haven asset. When scary stuff happens in financial markets, investors sell their risk assets and buy Treasuries. This has been true to a paradoxical extent. When scary stuff happens to the creditworthiness of the US government, investors sell their risk assets and buy Treasuries. When ratings agencies downgrade the US, people buy Treasuries. When it looks like the US Treasury might run into its debt ceiling and default on its debts, people buy Treasuries. When Treasuries get riskier, investors flee from risk, to Treasuries.
This is extremely ingrained in market expectations, but it is not a law of nature. It could change. The US government could find a way to make Treasuries risky in a way that causes investors to flee from Treasuries. I do not have a well-worked-out mechanism for how it could do that. Evidently saying “hey FYI we might default on Treasuries next week” does not work. Perhaps literally explicitly saying in so many words “hey we do not want Treasuries to be safe haven assets anymore, and we are going to enact wrenching far-reaching economic policy to make that happen” would work? I don’t know. We might find out.