U.S. Treasury yields dropped sharply on Thursday following President Donald Trump’s announcement of a 90-day tariff reprieve on most countries. The move eased market tensions and reversed a sharp sell-off in bonds, providing relief to investors.
At 4:50 a.m. ET, the 10-year Treasury yield fell by over 10 basis points to 4.288%, while the 2-year Treasury yield dropped to 3.841%, also a decline of 10 basis points. This was a significant reversal from Wednesday’s volatility when the 10-year yield had surged to over 4.51% at its peak due to heavy selling in the bond market. Notably, bond yields move inversely to prices, and one basis point equals 0.01%.
Trump’s Tariff Reprieve Sparks Relief
The market welcomed Trump’s announcement of a 90-day tariff “pause”, which will lower tariffs to a universal 10% rate for most countries during the reprieve. However, the relief does not extend to China, where tariffs on goods have been raised to 125% amid an ongoing trade war between the two nations.
The bond market had been under pressure earlier in the week due to investors offloading bonds, which caused prices to fall and yields to spike. Traditionally, U.S. Treasurys are seen as a safe haven during times of market volatility, making the sell-off surprising.
President Trump addressed the situation, saying, “I was watching the bond market — the bond market is very tricky. But if you look at it right now, it’s beautiful. The bond market right now is beautiful, but yeah, I saw last night where people were getting a little queasy.” Analysts believe Trump’s shift in tariff policy was influenced by the bond market’s reaction, as the president sought to stabilize investor confidence.
Market Reaction and Analysis
The strong demand for 10-year Treasurys during Wednesday’s debt auction further eased concerns among investors. However, analysts caution that the reprieve does not eliminate long-term uncertainties around U.S. trade policy.
Deutsche Bank analysts noted, “While there has been understandable relief as evidence of a Trump put reemerged following the extreme market conditions that we highlighted yesterday morning, the genie is still out of the bottle on policy unpredictability.” They added that the 10% universal tariff represents the largest tariff increase in decades, creating lingering trade uncertainty and limited visibility on future trade deals.
Upcoming Economic Indicators
Investors are now turning their attention to key economic data releases. The Consumer Price Index (CPI) for March, scheduled for release at 8:30 a.m. ET, will provide critical insights into inflation and the overall health of the U.S. economy. This will be followed by the weekly jobless claims report. Additionally, the Producer Price Index (PPI), set to release on Friday, will further shape market sentiment.
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