The lack of a flight to the US dollar and Treasurys during the crisis in Egypt is a warning sign that investors are moving away from traditional American safety plays, Pimco's Mohamed El-Erian told CNBC.
Since the revolt against President Hosni Mubarakhit a tipping point in late January, the dollar has changed little—slumping initially and on a slight uptick in the past few trading sessions. Treasurys, meanwhile, have sold off sharply, sending yields to their highest levels since April 2010.
At another time, such geopolitical turmoil might have sent investors flocking to the traditional safe-haven plays, but that has not been the case so far.
"Had you asked me 19 days ago what happens to the dollar if we have the sort of developments we had, I would have told you the dollar would be stronger," said El-Erian, co-CEO at the company that runs the largest bond fund in the world. "With the exception of three days, the dollar has weakened during that period. You are seeing a reassessment of the standing of the US dollar and the US Treasury market has the flight to safety, the flight to quality."
Another reason the market hasn't flocked to safety is that Egypt doesn't represent major systemic concerns, he added.
The US should consider the lack of a move into traditional US assets as "a warning that if we don't get our house in order we will no longer command the global standing" in currency and debt markets, El-Erian said.
However, should the situation escalate and start spreading through the region, that could change.
"If we get widespread violence in the streets you will get a massive risk-off trade," El-Erian said. "You will see equities sold off, oil go up and you will see a Treasury rally. The reason you would see that is people would start extrapolating the geopolitical risk and reassess the Middle East as a whole."