From Morningstar: 2025-04-29 03:49:00

Bond yields jumped after President Trump announced global tariffs, remaining higher despite some decrease. Investors are uncertain if this spike is temporary, depending on underlying causes. The rise in yields came as recession fears grew, with the potential for continued volatility due to economic uncertainty and trade policy impacts.

The stock market fell significantly following Trump’s tariff announcement, with the 10-year Treasury yield initially dropping but then spiking to 4.49%. The spike was unexpected and raised concerns over economic damage and recession risk. Traders unwinding due to increased volatility may have contributed to the rise in Treasury yields.

Priya Misra believes that investors deleveraging portfolios in response to rising volatility was a primary factor behind the spike in yields. The fear of rising deficits is also seen as a significant reason for the increase in rates. The potential for a recession and increased government spending may further drive deficits higher, impacting Treasury prices and yields. Investors are growing increasingly concerned about rising budget deficits leading to more tax cuts and issuance, causing market volatility. Inflation fears are also on the rise, with tariffs potentially increasing inflationary pressure. The spike in bond yields reflects these worries, particularly over the next few years. The potential wildcard of falling foreign demand for US Treasuries is adding to market uncertainty, as nearly a third of Treasuries are held by foreign investors. If other governments retaliate against US tariffs or if President Trump’s trade deficit goals are met, foreign demand for Treasuries could decrease significantly.



Read more at Morningstar: Will US Treasury Bond Yields Stay High?