Something unusual happened recently. During risk-off episodes, U.S. economic pain has been cushioned by falling bond yields and an appreciating USD, which translates into lower interest rates and more consumer spending power.
The risk-off episode that began in early April, which was just after the “Liberation Day” tariff announcements, saw the opposite. The price of the 10-year Treasury note fell more when denominated in all major currencies except the Chinese yuan. Foreigners were fleeing USD assets and Treasury paper, meaning the pain was amplified.
Had the panic not been stemmed, it was starting to look like a classic emerging market crisis.
The full post can be found here.
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