Investors are seeking safe-haven assets, with short-term US Treasuries becoming the top choice. BlackRock has already entered the market.

Despite the overall sell-off in the U.S. bond market, demand for short-term U.S. bonds remains strong. After the Trump administration announced large-scale tariffs, the market became increasingly concerned about the prospects of "stagflation," prompting investors to seek safe-haven assets. On Monday, exchange-traded funds (ETFs) tracking short-term U.S. bonds performed steadily, with the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL.US) and iShares 1-3 Year Treasury Bond ETF (SHY.US) mostly flat, closing up 0.01%. In contrast, the overall bond market in the U.S. experienced a sharp decline, with the Vanguard Total Bond Market ETF (BND.US) falling by 1.21%. Long-term U.S. bonds suffered even more, with the iShares 20+ Year Treasury Bond ETF (TLT.US) plummeting by 3.02%. In a strategy report released on Monday, BlackRock, Inc.'s Investment Research Institute stated that they have allocated more funds to short-term U.S. bonds to address the need for safe-haven assets amid the market's intense volatility. The institute noted that the market was significantly impacted after Trump announced the implementation of tariffs on April 2, exacerbating concerns about the global trade tensions. "As global trade tensions escalate significantly, we believe that risk assets will continue to be under pressure in the short term," wrote Jean Boivin, the head of BlackRock, Inc.'s Investment Research Institute, in the report. "We are shortening our tactical investment horizon and reducing overall risk exposure." In the report, BlackRock, Inc. also included a chart of the Federal Reserve's inflation expectations for the year 2025, emphasizing concerns about stagflation. It is worth noting that these forecast data were released in March, before Trump's latest tariff policy was announced. In the past week, investors bought a large amount of U.S. bonds for safe-haven purposes, causing yields to decline. However, on the most recent Monday, long-term rates rose again, putting pressure on bond prices. For example, the yield on 10-year U.S. Treasury bonds surged by 17.2 basis points to 4.164%, marking the largest single-day increase since last April. As the new round of tariff policies approaches its implementation date (April 9), the market is closely watching the progress of negotiations between the White House and other countries. China retaliated last week by announcing high tariffs on U.S. imports. "Risk assets will continue to be under pressure until policy uncertainties are eased," Boivin added. "At present, it is becoming increasingly difficult to determine the duration of this uncertainty. We expect economic growth to suffer greater setbacks, while inflation will continue to rise." In terms of strategy, BlackRock, Inc. has reduced its exposure to stocks, especially U.S. and Chinese stocks, expressing concern about maintaining long-term rates at high levels. "We maintain an underweight position in long-term U.S. bonds, as U.S. fiscal deficits remain high, coupled with strong core inflation stickiness," Boivin pointed out. "Loose fiscal policies in various regions globally and trade barriers will also provide additional impetus to inflation."