Core Viewpoint - Investors are accelerating the sell-off of U.S. long-term bond funds, leading to the largest outflow since the peak of the COVID-19 pandemic five years ago [1][2]. Group 1: Fund Outflows - In the second quarter of this year, U.S. long-term bond funds, which include government and corporate bonds, experienced a net outflow of nearly $11 billion, breaking the trend of approximately $20 billion in inflows over the past 12 quarters [2]. - This significant redemption is occurring amid growing concerns about the U.S. fiscal outlook, with analysts predicting that the outflow could match or exceed the levels seen during the market turmoil in early 2020 [2][3]. Group 2: Concerns Over U.S. Fiscal Health - The large scale of U.S. debt is a core factor causing investor unease, with the "Big Beautiful" plan proposed by Trump potentially adding trillions to the national debt over the next decade [3]. - Despite claims from the White House that tariffs and faster economic growth will help reduce debt, the market remains cautious [3]. - Investors are also preparing for potential higher inflation due to tariffs on major trading partners, which is a significant concern for bond investors as it erodes the real value of fixed interest payments [3]. Group 3: Market Dynamics - The outflow of funds reflects concerns about the long-term sustainability of U.S. fiscal policy, with high inflation and a large supply of government bonds contributing to market volatility [3]. - Long-term U.S. Treasury prices have dropped about 1% this quarter, with the 30-year Treasury yield recently falling to 4.816% [3]. Group 4: Shift to Short-Term Bonds - In contrast to the long-term bonds, over $39 billion has flowed into short-term U.S. bond funds this quarter, driven by the Federal Reserve maintaining high short-term interest rates, making these funds attractive in the current uncertain market [6]. Group 5: Long-Term Outlook - Despite the significant outflows, some experts remain cautiously optimistic about the long-term role of the U.S. Treasury market, suggesting that investors may diversify into international bonds but do not foresee the end of U.S. Treasuries as a core holding in global fixed-income portfolios [7]. - However, market participants may start demanding more compensation for holding bonds further out on the yield curve [7].