The mainstream framing, "flight to safety," "China is riskier so Treasuries yield more," has it arse backwards.

Safety in a bond market doesn't mean "the government is more trustworthy." It means "I can get my real purchasing power back at maturity." On that measure, the US isn't winning.

It's the government that has to pay the most to convince anyone to wait ten years for repayment, in a currency it can print at will, from a fiscal position with no credible path to stabilisation.

Now, the market has finally started questioning that risk premium. The countries and asset classes on the other side of that spread aren't riskier. They're simply not the ones being asked to pay for forty years of accumulated fiscal decisions all at once.

Consensus has been wrong about it every step of the way. In May 2022, one of the more prominent talking heads on Twitter/X summed up the mainstream trade of the moment in four words. "Buy bonds, wear diamonds."

Bonds were the safe, boring, consensus trade. Yields had backed up a bit, so the reasoning went, and it was time to lock in duration. Diamonds were the implied hard-asset hedge — the tangible store of value you'd pair with paper.

Both halves of that trade have been an unmitigated disaster.