The yield on the US 10-year Treasury note fell by approximately 7 basis points to 4.28% on Thursday, retracing some of the sharp gains seen the previous day when yields surged as much as 22 basis points to briefly top 4.5%.
Bond yields retreat in the US
Wednesday’s spike was driven by heightened volatility across global markets following a sudden escalation in the US-China trade war, which prompted a wave of risk aversion. Rather than flocking to traditional safe-haven assets like Treasuries, many investors opted to move into cash or liquidate positions altogether, raising questions about the resilience of government bonds as a refuge in times of geopolitical and economic stress.
Some relief returned to the bond market on Thursday after President Trump made a surprise announcement, declaring a 90-day suspension of reciprocal tariffs for most US trading partners — a move widely interpreted as an effort to de-escalate tensions and prevent further disruption to global trade flows. The decision helped soothe investor nerves and momentarily calmed fixed-income markets, although the exclusion of China from the temporary tariff reprieve signaled that tensions with Beijing remain firmly entrenched.
White House ramped up pressure on China
In fact, rather than easing hostilities, the White House simultaneously ramped up pressure on China by increasing tariffs on Chinese imports to 125%, up from 104%, in direct response to Beijing's latest round of retaliatory measures, which lifted duties on American goods to as high as 84%. The tit-for-tat exchange deepened concerns that the world's two largest economies are locking into a prolonged economic conflict, one that could have lasting implications for global growth, inflation, and monetary policy trajectories.
Even with the truce in place for many allies, the broader context remains worrisome. The blanket 10% tariff hike still in effect for nearly all imported goods marks the most significant across-the-board trade action by the US in decades. It continues to cast a long shadow over the outlook for international trade, business investment, and financial market stability. Bond investors remain on edge, weighing the inflationary risks posed by elevated tariffs against the possibility of slowing growth, a combination that complicates expectations for Federal Reserve policy and leaves Treasury yields vulnerable to further swings.
