After a prolonged period of decline, the Treasury market has finally begun to reassert its dominant role in global financial markets. This is due to a number of factors, including:

• Rising inflation:As inflation has risen around the world, investors have flocked to Treasury securities, which are seen as a haven asset.
• Uncertainty about the global economy:The ongoing war in Ukraine and other geopolitical risks have also led investors to seek haven assets.
• Fed tightening:The Federal Reserve’s aggressive tightening of monetary policy has also boosted demand for Treasury securities.

The Treasury market’s renewed prominence is significantly impacting other financial markets. For example, higher Treasury yields have led to higher borrowing costs for businesses and consumers. This has weighed on economic growth and stock prices.

The Treasury market’s leading role is also having a global impact. Central banks around the world are closely monitoring Treasury yields as they set their monetary policy.

The Treasury market’s renewed prominence is a welcome development for investors seeking stability and safety in their portfolios. However, it also reminds us of the market’s potential to amplify economic shocks.