Did Trump's Tariffs Trigger a "U.S. Bond Sell-Off"? Former Treasury Secretary Yellen: This Reflects a Loss of Confidence in the Policy!

Former US Treasury Secretary and former Fed Chairman Janet Yellen stated on Monday that the economic uncertainty caused by Trump's "tariff stick" has triggered a "very concerning" trend in US dollar-based assets.

She bluntly said, "The recent sell-off of US Treasury bonds indicates a 'worrying decline' in confidence in US policy-making."

Yellen mentioned in a program, "Over the past few weeks, we have seen a very unusual pattern in the developments of the financial markets. I do not think this is a manifestation of market dysfunction, where market liquidity completely dries up, but rather a pattern that shows a loss of confidence in US economic policies."

"The safety of fundamental financial assets is indeed very concerning," she added.

Yellen served at the US Fed for nearly a decade, and was the Fed Chairman from 2014 to February 2018 during the Obama administration, later serving as Treasury Secretary in the Biden administration. She said that the current market indicates that investors are cautious about US Treasury bonds.

She explained, "Normally, when the situation is chaotic and uncertainty is high, investors would want to invest in safe assets (buying US Treasury bonds), which often lowers the yield of US Treasury bonds, but now the yield of US Treasury bonds is rising. And when the yield of US Treasury bonds rises, it usually attracts capital inflows, thereby boosting the US dollar, but the US dollar is now falling again."

Yellen warned, "The recent drop in US bond prices and the sharp rise in yields are unusual phenomena, raising concerns that the US bond market might 'crash'."

"This indicates, investors are starting to avoid US dollar assets and are questioning the safety of US Treasury bonds, which are the cornerstone of the global financial system," she added.

In addition, regarding Trump's "ever-changing" tariff policies, Yellen criticized, "Things have been very chaotic. The implementation and suspension of reciprocal tariffs... this indeed creates an environment where families and businesses are paralyzed by future uncertainty—making planning almost impossible."

She also mentioned the US Fed. She said that if financial stability risks do arise, the US Fed will have the ability to intervene, but she "has not seen" the relevant factors come into play, and "hopes" they will not.

"Tariff policies and the uncertainty they create present the most difficult situation for the US Fed." Yellen believes that the US Fed needs to monitor inflation expectations, while stating "the US Fed will be reluctant to cut interest rates".

This is not the first time Yellen has criticized Trump in recent days. Last week, she bluntly warned that President Trump's tariff policies have "taken a devastating blow" to the economy.

"This is the most severe policy damage to our economy I have seen in my career. Trump's tariff plan is causing enormous damage to our economy," she said.