U.S. Treasury yields surged Wednesday as U.S. President Donald Trump’s tariffs regime continued to rattle markets.
At 5:40 a.m. ET, the 10-year Treasury jumped 10 basis points to 4.363%, with the 2-year Treasury yield rising 7 points to 3.808%.
One basis point is equivalent to 0.01%. Yields and prices move in opposite directions.
Investors are still reeling from the impact of U.S. President Donald Trump’s so-called reciprocal tariffs imposed on over 180 countries last week. Customs are expected to start collecting new tariffs on imports from 86 nations on Wednesday.
A total tariff rate of 104% on Chinese imports went into effect overnight, after China retaliated with 34% tariffs on U.S. imports on Friday, with the two countries now embroiled in a full-blown trade war.
Meanwhile, Canada retaliated with 25% tariffs on U.S.-made vehicles, including vehicles that aren’t compliant with the United States-Mexico-Canada Agreement.
Investors are looking to the release of the consumer price index on Thursday and the Producer Price Index on Friday, which will offer fresh insights about the health of the U.S. economy.
There are also some concerns after the Treasury Department’s auction on Tuesday for 3-year Treasury notes saw weak demand.
“Perhaps even more alarmingly, U.S. Treasury markets are also experiencing an incredibly aggressive selloff as we go to press, adding to the evidence that they’re losing their traditional haven status,” Henry Allen, vice president and macro-strategist at Deutsche Bank, said in a note.
“Given the scale of the rout, that’s raising questions about whether the Federal Reserve might need to respond to stabilise market conditions, and we can even see from fed funds futures that markets are pricing a growing probability of an emergency cut, just as we saw during the Covid turmoil and the height of the GFC in 2008.”
