U.S. Treasury yields surged on Wednesday as President Donald Trump’s latest round of tariffs took effect. The announcement of sweeping tariffs on almost all U.S. trading partners on April 2 had sent global markets into a tailspin and raised the risk of a recession. When Treasury yields go up, the cost of borrowing generally increases for people, businesses, and the government. Rising Treasury yields can also signal expectations of higher inflation.
The 10-year U.S. Treasury yield was at 4.34 percent, while the 30-year yield was at 4.82 percent, with the latter soaring above 5 percent shortly after midnight on Wednesday. This led to some experts referring to it as a “bond market meltdown.” Jim Bianco, the president and macro strategist at Bianco Research, remarked that something had broken in the bond market and that a disorderly liquidation was taking place. The latest round of tariffs on imports from dozens of countries and territories went into effect after midnight Eastern time in the U.S, leading to these significant movements in Treasury yields.
Tahra Jirari, director of economic analysis at Chamber of Progress, criticized the impact of tariffs on the manufacturing sector. She stated that tariffs were not going to revitalize manufacturing, but instead were increasing costs, tanking markets, and fast-tracking the economy into a recession. Jim Bianco noted the historic movement in the 30-year yield due to forced liquidation, not human managers making decisions about rate outlook at midnight. Independent economist Julian Jessop highlighted that Treasury yields were rebounding amidst market expectations of rate cuts by the Federal Reserve.
Given the uncertainty surrounding how long Trump’s tariffs could remain in effect, more swings for financial markets are expected. Economists caution that a recession could occur if the tariffs stay in place for an extended period, but potential negotiations to lower them soon could mitigate the worst outcomes. The impact of tariffs on borrowing costs, inflation expectations, and market volatility will continue to be closely monitored as the situation unfolds. It remains to be seen how these developments will affect the broader economy and financial markets in the coming weeks.
