U.S. President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., U.S., April 2, 2025.
Carlos Barria | Reuters
U.S. Treasury yields dropped again on Monday as President Donald Trump’s tariffs spurred a flight to safety while riskier markets took a hit.
The 10-year Treasury yield was marginally lower at 3.987%. The 2-year Treasury yield dropped around 8 basis points to 3.584% and hit its lowest level since September 2022.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Investors are reeling from the impact of the Trump tariffs unveiled last week, which hit over 180 countries and set a baseline tariff of 10% across the board. Major trading partners of the U.S. took some of the steepest tariffs, with China facing a total tariff rate of 54%.
The tariffs have stoked fears of a global trade war, as countries respond with their own tariffs on the United States. China retaliated Friday by slapping 34% tariffs on U.S. goods, and the EU has vowed to impose countermeasures if negotiations fail.
“This is a game of fiscal and monetary ping pong,” Gregory Faranello, head of U.S. rates at AmeriVet Securities, wrote in a note Friday. “Ultimately, if you want businesses to move back to the US there needs to be a plan. Company CEOs cannot allocate capital around moving targets.”
Trump continued to downplay the impact of tariffs, saying on Sunday evening, “I don’t want anything to go down, but sometimes you have to take medicine to fix something.”
That said, traders ratcheted higher their expectations for lower Federal Reserve rates. Traders now see the central bank cutting rates at least five times in 2025, per fed funds futures.
