Treasury Yields See Biggest Weekly Jump Since 2001

US Treasury Yields Surge Amid Trade War Uncertainty

The bond-market sell-off unleashed by US President Donald Trump’s trade war sent 10-year Treasury yields to the biggest weekly surge in over two decades as investors pulled back from US assets.

The scale of the move – with the benchmark’s rate jumping a half-percentage point over the past five days to 4.49 per cent – threatens to deal another blow to the US economy by pushing up borrowing costs more broadly.

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Ten-year yields, which are a baseline for the cost of mortgages and corporate loans, continued to march higher on Friday (Apr 11), rising another six basis points. That drove it to the largest weekly increase since markets reeled in the aftermath of the 9/11 terrorist attacks.

Trump’s Trade War Uncertainty

“This is so scary. We are redefining the risk-free rate of the world,” said Bhanu Baweja, chief strategist at UBS Group. “If you put volatility in the risk-free rate of the world, it will upend every market.”

Trump’s erratic tariff moves have led to wild swings in US government debt over the past week by not only undermining confidence in the economy, but also the direction of US policy and America’s standing in the world.

Investor Sentiment Shifts

The outlook shifted dramatically after Trump’s latest tariff gambit raised fears on Wall Street that it will send the US into a recession. That – and the unpredictability of Trump’s administration – drove investors to pull back from Treasuries and cast doubt on their privileged status as risk-free securities.

Global Market Impact

Investors also flocked to Europe in debt markets to escape the broader turmoil, leaving German yields largely unchanged in the week while the rate US 10-year debt surged more than 50 basis points. That’s the biggest underperformance of Treasuries compared to bunds since at least 1989, according to available data.

Trump and Bonds

The surge in yields is sharply at odds with the Trump administration’s stated goal of pulling down long-term interest rates to provide relief to households and businesses.

Treasury secretary Scott Bessent laid out the 10-year yield as a benchmark of Trump’s success, predicting it would come down as he reined in the deficit.

Pressured Fed

The chaos led to a chorus of calls on Wall Street for the Federal Reserve to step in. On Friday, JPMorgan Chase chief executive Jamie Dimon said he expected a “kerfuffle” in Treasuries.

“When you have a lot of volatile markets and very wide spreads and low liquidity in Treasuries, it affects all other capital markets,” Dimon said on an earnings call. “That’s the reason to do it, not as a favor to the banks.”

Fed Intervention

Others – including strategists at Deutsche Bank, Jefferies, and Goldman Sachs Group – earlier this week also started noting that further moves, with yields flirting with a break above 5 per cent, would warrant action from the Fed, though they differed on what officials ought to do.

Closing

The bond market sell-off has sent shockwaves through the global financial system, highlighting the uncertainty and volatility that has become a hallmark of the Trump era. As investors continue to grapple with the implications of the trade war, one thing is clear: the US Treasury market has never been more uncertain.

FAQs

Q: What is the current yield on the 10-year US Treasury bond?
A: The current yield on the 10-year US Treasury bond is 4.49 per cent.

Q: What is the biggest weekly increase in the 10-year US Treasury yield since 9/11?
A: The biggest weekly increase in the 10-year US Treasury yield since 9/11 is 4.49 per cent.

Q: What is the impact of the trade war on the US economy?
A: The trade war has led to a significant increase in uncertainty and volatility in the global financial system, which has had a negative impact on the US economy.

Q: What is the role of the Federal Reserve in this situation?
A: The Federal Reserve has been called upon to intervene in the market to stabilize the yield curve and prevent further volatility.