This is one of the most confusing stretches for the US market, which I remember recently. And the massive surge in long-term Treasury yields served as yet another example of strange trading behaviour in the aftermath of Trump’s tariff fuel, “liberation day.”
The 10-year yield (^TNX) jumped 17 basis points to kick off the week. Yield extended those profits on Tuesday, hovering at around 4.26%, rising to around 11 basis points.
Similarly, the 30-year yield (^TYX) jumped another 12 basis points on Tuesday after seeing its biggest move since March 2020. At the end of the market, its 30-year yield was trading at 4.72%.
Based on an intraday dataset dating back to 1998, market veteran Jim Bianco said, “If a decade fell at least 12 basis points and closed at least 12 basis points on that day, it only happened three times, including Monday.
“There are too few examples of how to identify market directions,” he added in X’s post.
The strategists laid out multiple theories. They range from investors looking for more liquidity within a volatile market to bond traders who feel confident that the US economy will likely avoid a recession.
“The bond market has been saying it’s not panicking. We’ve been saying it may not be in a recession yet, and we may not be in that situation,” Nancy Tengler, chief investment officer at Laffer Tengler Investments, told Yahoo Finance Tuesday. “I think there’s a lot of noise in the background.”
Bond markets are often seen as safe havens for investors in times of uncertainty. This was the term “Dujour” as political turmoil threatened to overturn the future of the global economy. And despite the largely sustained US labor market, Wall Street remains at the edge that changing trade dynamics can cause self-harm.
One of the biggest concerns is male dogs, with slowing growth, continuing inflation and rising unemployment. The risks of that scenario have been unfolding more firmly in Wall Street forecasts following a series of disappointing data releases, including the administration’s latest trade shocks and other policies unknown, such as Elon Musk’s recent efforts to cut government work from government efficiency (DOGE).
The story continues
Read more: What is Stagflation? How will that affect you?
“It’s too early to fully understand the economic impact of a potential trade war, but the tug-of-war between slowing growth and higher inflation will likely continue to add volatility,” LPL Financial said in a research note released Monday.
In other words, the bond market is caught in the middle of “stag” and “flation.”
What the heck is going on? Futures-Options trader works on the floor of the US Stock Exchange (AMEX) of the New York Stock Exchange (NYSE) in New York City, USA on April 7, 2025 (Reuters/Brendan McDermid) ・Reuters/Reuters
When inflation is expected to rise or rise, investors assume the Federal Reserve will strengthen monetary policy to narrow down price increases, leading to higher interest rates. Treasury yields often follow tandem as bond traders demand greater returns to offset the decline in purchasing power caused by inflation.
The opposite effect occurs when growth is slowed. This is because investors can increase bonds, protect themselves from economic deteriorating and protect themselves from rate cuts from the Fed.
So the severe surge in yields is disrupting Wall Street watchers.
“The kick-up fees were attractive yesterday, because there’s no obvious reason,” Steve Sosnick, the chief strategist of interactive brokers, told Yahoo Finance on Tuesday. “I read a million different opinions about this, and the two I’m coming back are neither particularly friendly. The first is that the rate starts (from tariffs) because inflation expectations are higher.”
“But there are concerns too,” he added. “Everything and after China, they could stop buying our debts and boycott us. Japan has the largest shares in the Ministry of Finance, but China was a big buyer.
In that case, Sosnick said the US Treasury must issue at a higher rate to make up for the loss.
And if the market is difficult to price low-risk assets like Treasurys, Sosnick added, “They certainly don’t have simple pricing like high-risk assets like stocks or crypto.”
Alexandra Canal is a senior reporter on Yahoo Finance. X @Allie_Canal, follow her on LinkedIn and email her to alexandra.canal@yahoofinance.com.
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