Craziness in the bond market may sound like an oxymoron—but for once, the usually quiet world of fixed income is the one in the spotlight.
Despite the Trump administration’s efforts to lower 10-year Treasury yields, they have surged wildly over the past few days. The 10-year yield jumped above 4.5% overnight as tariffs against international trading partners went into effect, concluding its largest three-day jump since December 2001.
By this afternoon, the yield on 10-year Treasury notes had fallen to 4.39%—still well above its 4.2% yield last Wednesday, aka Liberation Day. And if you think that’s wild, the 30-year Treasury was on track for its biggest gain today since 1982.
Why is this happening?
Earlier this week, we wrote about why President Trump wants to pull the 10-year Treasury yield down—it makes refinancing the US government’s debt cheaper, and makes borrowing on a whole range of goods easier for consumers. Instead, Treasury yields continue to rise—and that’s a problem for everyone inside and outside the White House.
The strange part? When there’s a massive stock selloff, investors usually flock to long-term Treasury bonds, which have the reputation of being a safe-haven asset. Bond yields fall when bonds rise, since yields and price move inversely.
But the global trade war of the past few days has upended that dynamic, as traders, hedge funds, and foreign governments alike rapidly dumped Treasury bonds, pushing yields higher.
Making sense of market moves
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However, today’s 10-year auction was a pivotal one, and traders were shocked to see a surge: $39 billion in 10-year notes were sold, and demand from foreign investors was robust. Less than an hour after the auction's results were made public, Trump took to Truth Social to declare a temporary ceasefire in the trade war.
Yielding some results
While Treasury Secretary Scott Bessent denied that the move to pause tariffs against many trading partners for 90 days was due to the bond market turmoil, it certainly seems like that was a huge factor.
“This was the news we and everyone on the Street was waiting for as the pressure on Trump took on a life of its own and the eye-popping rise of the 10-year yield was ultimately too much to hold his line on the self-inflicted Armageddon tariff unleashed at midnight,” wrote Wedbush equity analyst Dan Ives today of the tariff pause.
“The bond market probably forced their hand,” JPMorgan former Chief Global Strategist Marko Kolanovic told MarketWatch today, referring to the Trump administration.
By the end of the day, the 10-year yield had dropped to 4.34%. Baby steps, we suppose.—LB