The International Monetary Fund offered a dose of reassurance on Thursday, declaring the recent sell-off in U.S. Treasuries to be “orderly” even as long-term yields spiked to multi-year highs.
IMF communications director Julie Kozack told reporters that government bonds “remain liquid safe-haven assets,” pushing back against fears that the world’s largest debt market is losing its anchor.
Fiscal jitters drive yields higher
Benchmark thirty-year yields breached 5.1 percent this week after ratings agency Moody’s downgraded U.S. credit and as lawmakers advanced a sprawling tax and spending package.
The bill, passed by the Republican-controlled House by a single vote, mirrors much of President Donald Trump’s policy agenda and, according to the Congressional Budget Office, will add $3.8 trillion to the debt over the next decade.
“Although there has been some volatility in markets, market functioning, including in the U.S. Treasury market, has so far been orderly,” Kozack said.
IMF monitoring legislative path
She added, “We will look to assess a final bill once it has passed through the Senate and also once it’s been enacted,” signaling that the Fund’s staff will incorporate the fiscal package into upcoming forecasts.
Trade thaw offers modest upside
Kozack highlighted an earlier breakthrough in U.S.–China trade talks, noting, “The reduction in tariffs and the easing of tensions does provide some upside risk to our global growth forecast.”
“All of this said, of course, the outlook, the global outlook in general, does remain one of high uncertainty, and so that uncertainty is still with us,” she cautioned.
Market reaction mixed
Rising Treasury yields have already rattled equity markets worldwide, with indices from Frankfurt to Mumbai nursing losses of up to one percent.
Gold, meanwhile, pushed to a two-week high above $3,336 per ounce as investors sought refuge from fiscal uncertainty.
Bitcoin also brushed new peaks in what analysts described as a rotation away from duration-sensitive assets toward alternative stores of value.
Yet Kozack’s comments suggested policymakers believe liquidity remains ample, reducing the risk of a disorderly liquidation similar to the 2022 U.K. gilt crisis.
Outlook hinges on Senate vote
Market participants now await the Senate’s deliberations, where moderate Republicans and centrist Democrats could alter the scale or pacing of the tax cuts.
Some strategists argue that an eventual trimming of the package may temper the bond market’s reaction, while others say structural deficits make elevated yields a new normal.
For the IMF, the key question is whether tighter financial conditions spill over into emerging-market funding costs and global growth momentum.
Until lawmakers finalize the legislation, the Fund will continue to monitor spreads and cross-asset volatility indicators while refining its baseline projections.
Kozack’s message, though measured, provided a temporary anchor for traders parsing conflicting signals on inflation, deficits and monetary policy.
Whether that calm endures will depend less on IMF commentary and more on Washington’s ability to reconcile fiscal ambition with debt sustainability.
In the meantime, the world’s benchmark bond market remains liquid, if not placid, as investors weigh higher yields against the enduring appeal of U.S. credit.
For policymakers and traders alike, the coming weeks promise a crucial test of nerves, narrative and, ultimately, numbers.
All eyes now turn to the Senate corridor, where a single amendment could redraw the yield curve’s freshly inked contours.