While the trade conflict has shown signs of easing in recent days, a look at five-year sovereign credit default swaps provides insight into the so-called sell America trade that has sent yields higher, the dollar lower and sovereign CDS spreads wider.
Since the start of the most recent market turmoil, investors have pushed U.S. five-year credit default swaps roughly 20 basis points higher. Those swaps now stand well above comparable risk to German and U.K. swaps, which reflects a modest loss in the safe haven status of U.S. Treasury securities.
While there have been similar increases in the past—consider the debt ceiling crisis of 2023 and other politically inspired bouts of market turmoil—the recent move in U.S. credit default swaps does capture one of the unintended consequences of the attempt to force a rebalancing of the global economy by Washington.
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