Wall Street on alert: escape of Asian funds and doubts on the fiscal front shake the US debt market

Asia disarms positions in US assets

In parallel, the model that supported during Almost three decades the Asia commercial surplus —Save in the US and reinvest the profits in their assets, ”he entered the dismantling phase. After accumulating U $ 7.5 billion In US titles and actions since 1997, the main Asian economies look for other alternatives to invest.

Asian investors rethink Its historic preference For dollars in dollars to several fronts: The growing Fiscal Deficit of the United States, internal political polarization and the deterioration of its infrastructure. In addition, the use of the dollar in international sanctions and the recent cut of the maximum credit rating by Moody’s The power increases distrust in their currency.

This change of perception could trigger the transfer of more than US $ 2.5 billion in global capitalswhich would motorize a rise in emerging market currencies to the dollarand would boost flows to European and Japanese actions. With this, Asia abandons the strategy born after the crisis of 1997, which consisted of converting its commercial surpluses into investments in the US, to diversify its risks and exploit new opportunities.

The end of the “Treasuries” yield curve responds to several factors

Jorge Ángel HarkerInternational market analyst ADCAP – In statements to Scope– Highlights the inability of the Federal Government of the United States to reduce its debt level. “It is increasingly evident that the promises of maintaining a fiscal discipline will not be fulfilled, so investors demand higher rates to compensate for the risk of financing,” that is, “the”Prima for term“That is the extra profitability required by investors to assume the risk of maintaining their immobilized money.

To this internal pressure adds the fear of a stagflation already Tax crises in other developed countriesAnker argues, and exemplifies: “ Japan has seen performance demands growand great holders like China have begun to sell American treasure bonds. This phenomenon exerts pressure on the long part of the yield curve, ”he says.

Nicolás KohnHead Wealth Management Research in Capital Balanzhe comments that, the rates of the long -term treasure bonds “incorporated a perspective of greater deterioration in fiscal accounts For the next few years as the fiscal plan of President Donald Trump progresses in Congress, ”in line with what Anker raised.

Treasury bonds

Kohn adds that the differential between bonds at 10 and 30 years was extended, as the yields at 30 years climbed faster than those of 10 years. “This marked upward pressure at the Treasury long -term rates becomes especially worrying for the rest of the assets, In a context where the debt/GDP ratio exhibits a growing and divergent dynamic”, He says.

And the market also doubts that the Federal Reserve (Fed) will start an aggressive cycle of feat cuts, as thought a few months ago. Consequently, higher long -term yields are now valued. “This combination of factors – a premium demanded from the issuer and a more restrictive monetary policy cycle than anticipated It favors the increase in the yields of the treasure bonds, ”says Anker.

It also plays an important role that, according to private estimates, The American government debt could be increased by 30% in the next 10 years to a 130% level and interest payment could represent 30% of total income. “Obviously, the 5% threshold is of psychological importance, but the truth is that this level was already reached in October 2023, after the credit reduction of Fitch In August of that year, ”recalls Kohn.

Global Impact: The benchmark becomes more expensive and pressed to other emitters

On this point, Anker slides that when 30 -year -old yield exceeds 5 %, It means that the reference financing cost – treasure bonds – is increasingly high. “For example, In Argentina The base rate for calculating the coupon of your own bonds is more expensive, even when your risk premium has fallen. Although the reduction of country risk in Argentina has been remarkable, its effort is partly neutralized by the greatest US yields, ”he explains.

Disciplined Latin American emitters—Brazil and Colombia, among others“They also face much higher placement rates.” “These conditions affect not only governments, but also companies and individuals: in the US, mortgages are around 7%, so the purchasing power and decelerated the real estate market are reduced.

How far will the rates arrive before reaching a pain point?

Traditionally, there was talk of 4–4.5 % limits in the 10 -year and 5 % bonus in 30 years. For Anker, despite some central banks – in Europe and in emerging markets – they united their feat cuts, They can’t counteract the bullish pressure on Wall Street. Therefore, it is clear that if the yields remain high and the level of debt continues to increasethere will come a time when some link in the financial chain yields and wonders: “Is the consumer, companies or public finances? It is impossible to foresee it exactly, but these rates cannot be sustained indefinitely.”

Kohn on the other hand analyzes that the problematic for financial markets would be to see a scenario like that of the United Kingdom in September 2022 “where long-term rates uploaded between 140-150 basic points in a matter of weeks after a highly expansive budget”, although he clarifies that, “Not as much as the US current “.

Reconfiguration of global capital flows

In this context of adjustment, some emissions from emerging countries of greater risk –India, Indonesia, Brazil and South Africa– They have surpassed their pairs of lower performance since April 2. With the weakened dollar, local currency profits have more than compensated the “spillover” of higher rates in the US.

This turn in the bond market marks a structural change for investors and tax authorities: the titles of sovereign debt of economies developed such as the United States and Japan no longer operate in an environment of persistently low rates, but in a one determined by the rebalancing of global monetary conditions, tax sustainability and changing tensionsace. Those variables today redefine the true market thermometer.

Anker is clear and slides that investors take note of which ancient emitters of “zero risk“They lost fiscal discipline.” Japan, whose long -term bonds have reached levels close to 3.7 %, is no longer an inexhaustible source for the Global Carry Trade, and sectors such as Private Equity begin to resent it, “he says. Also the sale of American debt by China reduces the buyers base and further presses the US yields.

In addition, traditionally refuge assets—gold, silver and even certain cryptocurrencies– Experience explodes, as central banks and investors seek to diversify exhibitions due to the increase in the perceived risk in the Treasury titles.

Kohn concludes that, after the apparent truce in tariff tensions, “investors are redirecting their focus towards US fiscal health.” He warns that, although the risk of a British -style debt crisis is low, the pressure on long -term rates could persist if there is no firm commitment of the government to cut the deficit and stabilize the debt.