Bond market volatility leads to pause in trade war, concerns about US funding, market turbulence

From Yahoo Finance: 2025-04-12 12:00:00

Intense volatility in the bond market prompted President Trump to partially pause the trade war. US Treasury yields reached their highest level since January due to a sell-off. The Treasury market’s warning to Trump led to a temporary halt in steepest reciprocal tariffs for 90 days, with yields around 4.5% and 4.9% for 10-year and 30-year Treasurys.

The spike in yields is abnormal and suggests a shift in investors’ perception of US Treasurys as safe assets. Foreign selling and bond vigilantes throwing a tantrum due to tariffs are contributing to the bond market sell-off. The basis trade unwind by hedge funds is adding to market risk and concerns about future market volatility.

Wall Street is worried about the implications of the bond sell-off on financial markets and America’s reputation as a premier investment destination. The lack of demand for government debt could lead to a funding problem for the US. While demand at recent Treasury auctions was strong, concerns remain about market instability and liquidity issues.

Economists and investors are cautious about the bond market’s recent behavior, with fears of crossing into market dysfunction territory. The bond market’s role as a risk-asset diversifier is being questioned, potentially signaling more turbulence ahead. Concerns about wild market movement, liquidity, and future funding needs for the US are top of mind for market participants.



Read more at Yahoo Finance: The bond market went haywire this week. Here’s why that’s a warning for the US and Trump.