By Davide Barbuscia
NEW YORK (Reuters) -A sharp selloff in U.S. Treasuries this week has remained orderly despite continued uncertainty stemming from the U.S. administration’s trade policies, said Dan Ivascyn, group chief investment officer at U.S. bond giant PIMCO on Wednesday.
U.S. Treasuries, a building block of the global financial system, came under heavy pressure this week as turmoil unleashed by U.S. tariffs prompted forced selling and a dash for cash. But the selloff was less violent than what markets experienced at the onset of the COVID-19 pandemic in early 2020, said Ivascyn.
“Anytime you have big moves like this there’s going to be some pain in certain places,” he said. However, the deleveraging taking place across markets – which happens when hedge funds trim debt-fueled trades – had remained “quite orderly”, he added.
The Treasury sold $39 billion 10-year notes on Wednesday in an auction that was closely watched by investors as a test of continued appetite for U.S. government bonds. The auction met good demand, with Treasury yields – which move inversely to prices – declining in the immediate aftermath of the sale.
“It was a positive sign for the market that had already been a lot weaker,” said Ivascyn in an interview. PIMCO is a debt-focused investment firm with nearly $2 trillion in assets.
A key question for markets has always been the administration’s willingness to calibrate policies based on market signals, and to understand that what could work over the long term can be disruptive in the short term, said Ivascyn.
President Donald Trump’s announcement on Wednesday of a 90-day pause on many new tariffs on trading partners was good news for economic and market stability, he said.
Still, he added that economic uncertainty remained high and risks could be building up in areas of the market such as private credit that could be more vulnerable to a stagflationary shock caused by U.S. trade policies.
“You can’t think of much worse of a scenario for … direct lending to more economically sensitive borrowers than a stagflationary shock leading to a very high probability of recession in a world of disruption and significant global friction,” Ivascyn said.
(Reporting by Davide Barbuscia in New York; Editing by Nia Williams)
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