US Treasury yields rose sharply on Wednesday, with the 10-year yield surging about 20 basis points to around 4.45%, while the 30-year yield climbed to nearly 4.9%, marking its highest level in almost three months.
Treasury yields rise further
The broad-based sell-off in government bonds reflected mounting investor anxiety following the latest round of reciprocal tariffs imposed by the Trump administration, which included a cumulative 104% levy on Chinese imports. In a swift countermeasure, China responded by announcing an additional 50% tariff on U.S. goods, bringing its total retaliatory tariff burden to 84%. The abrupt escalation in trade hostilities has amplified fears of a prolonged economic confrontation that could both tip the U.S. into recession and reignite inflationary pressures, particularly if supply chain disruptions become entrenched.
This uneasy combination of weakening growth prospects and stubborn inflation—a scenario reminiscent of stagflation—has begun to challenge the market’s earlier assumptions about an imminent and aggressive easing cycle by the Federal Reserve. With inflation risks resurfacing and the potential for tariff-driven price increases looming, traders are reassessing how much room the Fed truly has to cut rates without risking credibility or stoking further instability.
Sustained foreign selling
Adding to the upward pressure on yields were reports of sustained foreign selling, especially from Asian sovereign investors who may be reducing exposure to U.S. assets amid geopolitical frictions and currency risk concerns. Simultaneously, signs of a broader flight to cash emerged, with some institutional investors seen liquidating Treasury positions to bolster liquidity amid a spike in volatility across asset classes. These developments have raised questions about whether U.S. government bonds are beginning to lose their traditional safe-haven appeal—a role they’ve long played during periods of global turmoil.
The yield curve, meanwhile, steepened notably, reflecting a complex market outlook in which long-term inflation and fiscal concerns dominate, even as near-term rate cut expectations remain in play. Analysts are watching closely for any signs of dislocation in funding markets or stress in leveraged portfolios, which could further accelerate the sell-off or trigger spillovers into credit and equity markets. With uncertainty running high and policy ambiguity mounting, volatility in the bond market is expected to remain elevated in the coming weeks.
