U.S. Treasury yields experienced a notable decline on Thursday, providing investors with a sense of relief following President Donald Trump's announcement of a 90-day tariff reprieve on most countries. This unexpected policy shift helped reverse a significant sell-off in the bond market, which had seen yields rise sharply earlier in the week.
As of 4:50 a.m. ET, the 10-year Treasury yield fell by over 10 basis points, settling at 4.288%. Similarly, the 2-year Treasury yield also saw a decline of just over 10 basis points, dropping to 3.841%. On Wednesday, the 10-year Treasury yield climbed to more than 4.51% at its peak, fueled by unusual volatility in the bond market.
Investors expressed relief after President Trump announced a 90-day tariff pause affecting all countries, which temporarily reduced the tariff rate to a universal 10%. However, this reprieve notably excluded China, where tariffs on goods surged to 125% amidst ongoing trade tensions. The bond market was under intense scrutiny on Wednesday, as a wave of selling led to declining prices and spiking yields, a surprising trend considering that investors typically seek the safety of U.S. Treasuries during periods of market instability.
Analysts suggest that President Trump's decision to alter his tariff stance was influenced by pressures from the bond market. In a statement, Trump acknowledged the complexities of the bond market, noting, "I was watching the bond market — the bond market is very tricky. But if you look at it right now it's beautiful." These comments came as investors reported feeling uneasy in light of the previous day's market fluctuations.
Furthermore, strong demand for 10-year Treasuries during Wednesday's debt auction alleviated some investor concerns. Analysts at Deutsche Bank commented that while there is a sense of relief following the president’s recent announcements, the unpredictability of policy remains a significant factor. They stated, "The genie is still out of the bottle on policy unpredictability." The introduction of a 10% minimum universal tariff marks one of the largest tariff increases in decades, contributing to ongoing trade uncertainties with limited clarity on acceptable agreements from the U.S.
Looking ahead, investors are keenly awaiting the release of the consumer price index for March, scheduled for 8:30 a.m. ET. This report is expected to provide essential insights into the overall health of the U.S. economy. In addition, weekly jobless claims will be monitored closely, while the producer price index is set to be released on Friday, further informing market expectations.
