Traders work on the floor of the New York Stock Exchange (NYSE) on April 09, 2025 in New York City.
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Global bond yields largely reversed course on Thursday as equities rebounded on a historically volatile week for markets driven by U.S. President Donald Trump’s tariff policy.
Trump has stunned investors over the past week, first by imposing far more severe than expected duties on more than 180 countries, then by engaging in a retaliatory tariff escalation with China and by abruptly announcing a 90-day reduction in tariffs to 10% on almost all U.S. trade partners.
That last development, which took place on Wednesday, was described by some analysts as a “Trump put” — an intervention to stem market moves — and led to one of the strongest rallies on Wall Street of all time.
U.S. Treasury yields cooled significantly on Thursday, recovering from a sell-off which bucked the conventional trend for bonds to gain ground as investors move out of equities in search of safer assets.
At 10:35 a.m. in London (5:35 a.m. ET), the yield for the 2-year Treasury was down 10 basis points as the 30-year cooled 7 basis points, while the 10-year — which economists say has suffered its strongest period of volatility for two decades — was down 11 basis points.
Trump said he had been “watching” the bond market — known for forcing the hand of political leaders attempting major economic overhauls — in his Wednesday announcement of a tariff pause, calling it “very tricky” and acknowledging “people were getting a little queasy.” With his tariff policy widely considered likely to be inflationary, a sustained rise in yields could lead to a combination of higher prices, higher borrowing costs and much weaker economic growth or even a recession.
Bond yields elsewhere also pivoted on Thursday amid a stock market bounce across Europe and Asia-Pacific.
German bond yields were broadly higher after benefiting earlier in the week from fleeing into safe havens. Germany’s 2-year bund yield was last up 11 basis points, as the 10-year rose 5 basis points.
The U.K., plagued by investor concerns over its fiscal outlook, was particularly swept up in the turmoil this week. The yield on U.K. 30-year bonds, which on Wednesday spiked as much as 30 basis points and ended around 25 basis points higher to hit their highest close level since 1998, tumbled 19 basis points.
“The 90 day pause was enough to arrest the gilt sell-off in the long end,” Sanjay Raja, chief U.K. economist at Deutsche Bank Research, told CNBC.
“Similar to what we saw in the U.S. yesterday, long end bonds are rallying today. This is most certainly due to market sentiment shifting on Trump’s reciprocal tariffs. And given the pause, markets are rightly assuming that there is a high bar for them to be reinstated at their initial levels. If anything, there’s a sense of relief that trade deals with the U.S. are firmly on the table.”
Bond market moves have been somewhat more stable in Asia. Japanese 10- and 2-year yields were 7 and 5 basis points higher respectively on Thursday as investors piled into stocks.
John Higgins, chief markets economist at Capital Economics, said one reason for the Thursday bond market reversal was a renewed reassessment of the path of monetary policy.
“Expected [U.S.] interest rates have rebounded a bit today, as the latest news from the White House has reduced the risk of recessions,” Higgins told CNBC.
“Another reason is that some of the prior sell-off in long-dated Treasuries and Gilts may have been due to profit-taking on, or even fire sales of, government bonds by leveraged investors as equities plummeted. “Accordingly, there was scope for their yields to come back down as the equity market rebounded and the need for such action abated.”
While sentiment has shifted, there is still huge uncertainty over whether and on what terms countries will be able to cut deals with the U.S. and how China will respond, he continued.
Meanwhile, given that a lot of recent volatility appears to have been tied to the stock market, moves may remain higher than usual, factoring in the lack of clarity about upcoming moves, Higgins added.
