For decades it was Bonds The American Treasury is the basic pillar of the global financial system and the safe haven in which investors refer to in times of crisis, the golden scale of sovereign debt, and the basis stone for the global capital market.
But between 2024 and 2025, the unconditional confidence in this financial instrument began to erode, and the repercussions of this erosion began to shake global markets along continents.
Some economists called the “Great Shock of Treasury Bonds”, which are not just a crisis of fluctuations in the market, but a structural and geopolitical crisis, according to specialists. Dollar As a global backup currency.
This crisis is rooted to a conference “Breton Woods“In 1944, which drew the features of the modern global monetary system.
“The Storm of Revenue” .. The beginning of the collapse from the heart of Wall Street
By mid 2024, US bond returns have jumped for 10 years to more than 5.2%, the highest level since 2007.
The reason is a toxic mixture of Financial deficit Annual, which exceeded 1.8 trillion dollars, and the costs of a debt service exceeded $ 514 billion annually, and investor confidence in the United States’s ability to pay its debts in the long run has declined.
Foreign central banks, headed by China and Japan, have begun to reduce their possession of US treasury bonds driven by geopolitical and financial concerns.
With the rise in returns, bond prices fell, causing heavy losses to investors from major institutions, and what began as a correction in interest rates turned into a confidence crisis.
“The market sends a clear indication that it no longer trusts the ability of the American political system to manage its financial future.”
What is the importance of treasury bonds really?
US Treasury bonds play a fundamental role in structuring the global economy, as they are more than just debt tools, and to understand the size of their impact, we must consider its multiple use, which affects every corner of the international financial markets:
- A pillar of foreign exchange reserves: More than 59% of the world’s foreign currency reserves are densely denied in dollars, most of which are in treasury bonds.
- A safe haven for crises: In times of turmoil, investors turn to it as a natural defensive option.
- Global pricing scale: Interest rates on these bonds determine the return curve that is used to pricing corporate loans, mortgages and sovereign debt around the world.
- A basic guarantee in the ribo market: It is used as a major guarantee to provide liquidity between banks and major financial institutions.
- A pillar of monetary policy: World Central Banks follow the US Federal Reserve moves using bond returns as a guide.
Any doubt about the reliability of treasury bonds not only threatens America, but also strikes the foundations on which the entire global financial system is based.
How did the American hegemony come here?
In order to understand the roots of this crisis, it is necessary to return to the “Bretton Woods” conference in 1944, which drew the map of the global economy for post -World War II and laid the domination of the dollar.
At that conference, 44 countries agreed on a new financial system that the dollar adopts a global backup currency that can be converted into gold, but with the collapse of this system in 1971 an unannounced mechanism emerged: oil countries and other exporting economies that reumed their surpluses into American treasury bonds, which supported Washington’s inability for many years without causing panic.
However, the warning of the economist Robert Trevin in the 1960s is still ringing in the ears of decision -makers, “the state that issues the global currency will be forced to dump the world with liquidity, and this inevitably leads to erosion of confidence in that currency.”
By 2025, Trevin’s prophecy appears to have been fulfilled.
Great cracks .. from American spending to Chinese escape
In recent years, clear cracks began to appear in the American religion system, and these cracks soon turned into deep cracks:
- Federal spending out of control
From the stimulus associated with the Kofid-19 to expand the military expenditures and infrastructure projects, the American Federal Religion rose to about 37 trillion dollars, and it constituted approximately 130% of the gross domestic product.
The budget office is expected in Congress“The debt service must exceed the defense expenses soon.
“When more than 30% of tax revenues are consumed in paying benefits, the financial deficit becomes a threat to national security,” US economic expert Carmen Rinhart said in a paper published in the University of Stern.
- Foreign capital escape
In 2024, China reduced its possession of treasury bonds to less than 700 billion dollars after it exceeded 1.1 trillion years ago, and Japan and the Gulf states followed, in a trend that reflects a strategic shift towards gold, yuan and digital assets.
He has warned International Monetary Fund The end of 2024 by saying, “Any weakness in the demand for US treasury bonds may lead to systematic disturbances in global reserves.”
- Customs tariffs deepen economic wounds
In the midst of the crisis, the policies played Protection The American is an indirect role in destabilizing the markets, on top Customs tariffs On imports from China and Europe during the second half of 2024.
These policies adopted by the second Trump administration under the slogan “Trade Balance” led to the high prices of imported goods, which increased inflationary pressures internally.
On the other hand, countries such as China and Germany responded with reprisal fees, which launched a wave of trade tensions that negatively affected the volume of global trade exchange and weakened growth expectations.
“The definitions are not just a negotiating tool, but rather a financial burden that exacerbates the cost on the consumer and the state alike, especially when it is associated with a large -scale financial deficit and a sharp rise in bond returns,” said economist Paul Crowagman.
- The vortex of high benefits
The federal reserve remained interest rates above 5% in an endeavor to combat inflation, which raised the cost of debt service and forced the government to further borrowing. This expansion increased the supply of bonds and pressure on prices.
In October 2024, a great bid of long -term bonds failed when major banks refrained from buying, causing violent shock in the market.
How did the infection reach the world?
With every rise in the returns of American bonds, the emerging economies suffer from successive shock waves, as countries that depend on financing in dollars or that have fragile reserves find themselves in a suffocating dilemma in terms of:
- High borrowing costs: The countries of Africa, Latin America and Southeast Asia have witnessed leaps in the benefits of loans.
- Capital escape: Local currencies collapsed and inflation rates increased with capital exit waves.
- Renewable debt crises: Countries like Sri Lanka, Pakistan and Egypt have started new rounds of debt restructuring negotiations by early 2025.
In the United States, major companies such as “Boeing” and “Ford” faced delay in issuing bonds after the markets witnessed a wave of credit cuts.
In light of this chaos, voices increased globally to demand a reconsideration of the international financial system, as the “BRICS” countries demanded the establishment of alternative systems to settle payments away from the dollar, while Europe called for the adoption of a multiple -polar reserve system that includes the euro, yuan and digital currencies.
Is there a way out?
Despite the complexities of the scene, economists and international institutions have put forward a package of proposals that may contribute to containing the crisis or reducing its effects in the future through:
- Issuing global green bonds: In 2024, economist Giovanni Montani proposed the issuance of green bonds through international institutions to reduce dependence on US treasury bonds.
- Automatic delay mechanisms: Tools such as “conditional bonds” that extend the deadlines for merits automatically take place during crises.
- Enhancing the role of special withdrawal rights: Some economists have suggested using a special withdrawal basket from the International Monetary Fund or asset -backed digital currencies as alternatives to dollar reserves.
- New Bretton Woods system: Academics such as James Ishham and Banguitis Lisandro called for a new international summit focusing on sustainable financing, digital currencies and geopolitical risk sharing.
When the heart of the financial system vibrates
The US Treasury bonds are no longer that “corner” that reassures the markets and does the global financial system on its banks, but today they are a source of confusion and apprehension, and a hub for existential questions that shake the confidence of investors and decision -makers alike.
The 2024-2025 crisis has revealed deep structural damage, not only in the management of the American debt, but also in the hypothesis on which American financial domination has been based since “Bretton Woods” until today.
Observers believe that the disturbances in the auctions of the bonds, the flight of capital, and the questions about the feasibility of the dollar’s continuation of a backup currency are no longer just passing concerns, but rather indications of the end of another stage and start.
In light of this transformation, the fundamental question remains: Is the United States and the world heading towards the restoration of a mutant system? Or are we facing the beginning of a gradual dismantling of what remains of the “dollar world”?
As the famous English economist John Mainard Keynes said, “The time we are waiting for a long -term balance in which we may all die.”