After yesterday’s late-afternoon rout, US stock futures are pointing to another morning of sharp losses. Equity markets in Asia and Europe tanked overnight, ending a week of staggering losses. But here’s the interesting thing: even as stock markets crumble, ’safe haven’ US Treasury bonds yields are up. The government’s desperate rescue efforts are started to raise concerns over the future of US debt…

This from Bloomberg:

“We have seen some kind of decoupling between Treasuries and the stock market this week,” said Karsten Linowsky, a fixed-income strategist in Zurich at Credit Suisse Group. “Treasuries aren’t benefiting so much anymore from the increasing risk aversion. People have started to worry about how much these rescue packages will influence the supply side.”

Former New York Federal Bank trader John Jansen writes this on Seeking Alpha:

The US market has always represented the ultimate safe haven venue, yet this morning according to my screen at about 700AM New York time, the yield on the 2 year note was actually several basis points higher than where it closed late yesterday. Indeed, the yield on every Treasury issue is higher than the level at which it finished in late trading yesterday.

Is this the beginning of the end for the dollar and the Treasury market? Is this the first sign of the bursting of the bubble in Treasury securities? That market, in a sense, represents the ultimate bubble, as it exists at the whim and caprice of foreign investors who have, as participants in a Faustian bargain, financed our war(s) and our lifestyle so generously over the last decade. Maybe even that bizarre construct is crashing about us as we speak.

I can only say that with financial markets in full retreat and full meltdown, it is thoroughly uncharacteristic for prices of Treasury coupon securities to be lower.

Is this really the first sign that US is no longer seen as ‘too big to fail’? Well, don’t say we didn’t warn you. This from a Bill Bonner article published on Contrarian Profits last month:

US Treasury bonds are unique. They depend on the value of the dollar…which the issuer itself controls. But as the war between Mr. Market and the feds continues, the US Treasury will have a harder and harder time maintaining the value of the dollar. Because wars are costly. The feds will have to stretch the dollar farther and farther in order to meet the expense. Eventually, the elastic dollar will snap…and bonds investors will have their turn. Bonds will crumple over too…