Why US Treasuries may no longer be a safe haven

US Treasuries have long been seen as a safe haven during economic downturns, but their recent performance has fallen short of expectations. T. Rowe Price summarises the reasons in a recent insight. In past bear markets, the asset manager highlights, Treasuries delivered strong positive returns as falling stocks signalled recession, and the Fed responded with rate cuts, boosting bond prices. However, the latest equity slump, triggered by tariffs and economic uncertainty, saw long Treasuries return -1.4% even as the S&P 500 dropped nearly 16%.

“One reason for the surprising performance of US Treasuries is that higher tariffs are likely to slow US economic activity but also threaten to push prices higher. This potentially puts the Fed in a difficult position. Fed policymakers may be less willing to cut rates to stimulate the economy if they fear that inflation could get out of control,” says Timothy C. Murray, Capital Markets Strategist Multi‑Asset Division at T. Rowe Price. Given this backdrop, T. Rowe Price suggests looking beyond U.S. bonds.

Read the full insight here.