U.S. Treasury yields moved lower on Thursday as investors breathed a sigh of relief after U.S. President Donald Trump enacted a 90-day tariff reprieve on most countries, reversing a sharp sell-off in bonds.
At 4:50 a.m. ET, the 10-year Treasury yield was lower by over 10 basis points to 4.288%, and the 2-year Treasury yield also dropped just over 10 basis points to 3.841%. On Wednesday, the 10-year Treasury climbed to over 4.51% at its highest, driven by unusual volatility in the bond market.
One basis point is equal to 0.01% and yields move inversely to prices.
Investors are relieved after Trump announced a 90-day tariff “pause” on all countries affected, which involves bringing the rate “down to a universal 10% tariff” during that time. This reprieve excluded China, which saw tariffs on its goods rise to 125%, as the two countries are in the midst of a trade war.
The bond market came into sharp focus on Wednesday as investors sold off their bond holdings, which resulted in prices dropping and yields spiking. That was unexpected as investors typically flock to U.S. Treasurys during times of market volatility.
It’s believed that Trump flip-flopped on his tariff policy in light of bond market pressure, with the president 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.”
Additionally, strong demand for 10-year Treasurys at the debt auction on Wednesday eased investors’ concerns.
“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,” analysts at Deutsche Bank said in a note.
“Indeed, a 10% minimum universal tariff represents the largest tariff increase in decades and heightened trade uncertainty is likely to linger, with limited visibility on what kind of deals the U.S. would find acceptable.”
Investors will also look to the consumer price index for March, due to be released at 8:30 a.m. ET, and will offer much needed insights on the health of the U.S. economy. That will be followed by weekly jobless claims. The producer price index is due on Friday.
