Janet Yellen, former U.S. Secretary of the Treasury, recently noted regarding the sell-off in the U.S. bond market that "investors are starting to avoid dollar-based assets, which raises questions about the stability of U.S. Government Bonds, the foundation of the global financial system," stating that the market's trust in U.S. economic policy is waning.
Yellen, who served in the previous Biden administration, said on CNBC on the 14th that considering the possibility that China, which holds the second-largest amount of U.S. Government Bonds in the world, could sell them, "if China sells dollars, their own currency value will increase, which would pose risks to the U.S. bond market and international financial stability, which would also be detrimental to them," adding, "this signifies a very serious situation, so I do not expect them to do so."
He projected, "While there has been inflation, considering its incomplete recovery, the Federal Reserve will hesitate to lower interest rates, and the possibility of a recession has increased significantly," although he added, "I don’t want to go as far as predicting a recession."
He expressed regarding the Trump administration's tariff policy that it is "completely chaotic," stating, "This uncertainty creates an environment where households and corporations feel paralyzed, making planning nearly impossible," and added, "The tariff policy and the uncertainty it creates are presenting the Federal Reserve with the most difficult situation."
Yellen expressed concern that regarding President Donald Trump's imposition of tariffs indiscriminately on not only China but also allies, "the U.S. may begin to appear isolated and unreliable," continuing, "this creates opportunities for China to collaborate with our top allies like Japan or South Korea."