Trump Dodged a Catastrophe from the Bond Market, however the Injury Isn’t Over But
Washington, D.C. – April 10, 2025, 10:44 AM PDT – President Donald Trump narrowly averted a bond market disaster this week along with his abrupt 90-day tariff pause introduced Wednesday, April 9, however the monetary fallout continues to ripple, signaling that the U.S. economic system—and Trump’s agenda—stay on shaky floor. After a tumultuous week that noticed U.S. Treasury yields spike and world markets reel, the pause despatched shares hovering in a historic rally, but Thursday’s sharp fairness pullback and stubbornly elevated bond yields underscore a lingering fragility that might nonetheless derail the administration’s plans.
The bond market’s rise up started as Trump’s sweeping tariff rollout—10% on all imports, with 25% on Canada and Mexico and a jaw-dropping 125% on China—unleashed chaos. By Tuesday, April 8, the $47 trillion U.S. fixed-income market was in freefall, with traders dumping Treasuries at a tempo unseen in a long time. The ten-year Treasury yield surged from 4.0% to 4.51% in three days, whereas the 30-year yield briefly topped 5%—ranges not hit since 2023—elevating borrowing prices to a two-year excessive, outpacing even Greece’s. “The bond market screamed at Trump to cease,” stated Ed Yardeni, head of Yardeni Analysis, who dubbed the sell-off a “vigilante” rebellion. “He dodged a bullet, however the gun’s nonetheless loaded.”
Trump’s pivot got here after Treasury Secretary Scott Bessent and financial aides briefed him Wednesday on the accelerating sell-off, spotlighting a weak Treasury public sale that hinted at waning international demand—probably from China, a $760 billion bondholder eyeing retaliation. “I used to be watching the bond market—it’s tough,” Trump admitted to reporters, a uncommon nod to a pressure he couldn’t bluster previous. The pause, excluding China however softening reciprocal duties to a common 10%, triggered a Wall Road frenzy: the Dow leapt almost 3,000 factors (7.8%), the S&P 500 gained 9.5%, and bond yields eased barely to 4.3% by Thursday morning. But, the aid was short-lived—equities shed over half these beneficial properties by noon Thursday, with the Nasdaq down 5%, as the truth of a still-potent commerce battle sank in.
The harm isn’t over. The bond market’s twitchiness—fueled by hedge funds unwinding $800 billion in leveraged “foundation trades” and fears of international bond-dumping—threatens Trump’s objective of slashing borrowing prices. Mortgages, auto loans, and company debt, all tied to the 10-year yield, face upward stress, undermining his pledge to ease People’ monetary burdens. “This isn’t a reset; it’s a breather,” stated Joseph Brusuelas, chief economist at RSM. Posts on X echo the unease: “Bond vigilantes 1, Trump 0,” one consumer quipped, whereas one other warned, “Recession’s nonetheless on the desk.”
The Fed, holding charges at 4.25%-4.5%, watches warily as March CPI knowledge, launched at 5:30 AM PDT at the moment, looms. February’s 2.8% inflation fee might climb if tariff results linger, complicating any rate-cut hopes Trump has pushed for. “The basics haven’t modified,” Fed Governor Michelle Bowman reiterated Thursday, signaling no coverage shift regardless of the pause. With the yield curve steepening—two- to 10-year gaps at their widest since 2022—and company bond issuance stalling ($10 billion in April versus $190 billion in March), the bond market’s message is obvious: Trump might have dodged catastrophe, however the wounds are deep, and the clock is ticking.
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