U.S. Bond Market Stabilizes As Trump Walks Back Tariffs
The U.S. bond market has stabilized after U.S. President Donald Trump announced a 90-day tariff reprieve on most countries.
Following a sharp selloff in bonds on April 9, with yields on the 10-year Treasury spiking to 4.50%, the market for fixed income investments has calmed.
The 10-year Treasury yield has declined by more than 10-basis points to 4.288%, and the two-year Treasury yield also fell over 10-basis points to 4.295%.
The moves lower in yield come after a period of extreme and unusual volatility in the bond market that was prompted by massive selling of U.S. Treasuries.
One basis point is equal to 0.01% and yields move in opposite direction to prices.
The volatility in the bond market was unexpected as investors typically run to the relative safety of U.S. Treasuries during times of market volatility.
There had been speculation that foreign governments such as China and Japan were selling their U.S. Treasuries in an effort to sink the market and pressure President Trump.
While Trump capitulated and announced he is lowering the tariff rate on most countries to 10%, he also ratcheted up the tariff on Chinese imports to 125%, sparking concerns of a trade war between the world’s two biggest economies.
For now, the bond market is calm and demand for the latest auction of 10-year Treasuries appears strong.
However, the current calm could be short lived as investors turn to upcoming U.S. economic data, namely the March Consumer Price Index (CPI) that measures inflation.
