Treasury yields soared on Friday, extending a weeklong run-up that has defied expectations and threatened the Treasury market’s status as a safe haven in times of stock market turmoil.
The yield on the 10-year Treasury, which influences interest rates on all kinds of consumer loans, rose as high as 4.59% on Friday before retreating slightly. The yield recently stood at 4.5%, 6 basis points above yesterday’s close.
Treasury yields soared this week even as tariffs went into effect on Wednesday, battering the stock market and raising fears of an economic slowdown. The 10-year yield has skyrocketed more than 50 basis points—or half a percentage point—in the last five days, its largest weekly increase since 2008.
The bond sell-off—bond yields and prices are inversely related, meaning yields rise when prices fall—has defied standard market logic. Bond prices usually increase when stocks fall as investors pivot to the relative safety of U.S. Treasurys. Bond prices also tend to increase as the risk of recession grows more acute; investors, expecting the Federal Reserve to cut interest rates in response to a slowdown, purchase Treasurys to lock in today’s comparatively high rates.
Experts have pointed to a few possible culprits for the bond market’s recent volatility. Some point to the potential for Trump’s tariffs to nudge inflation higher, which could force the Fed to keep interest rates elevated.
Others have speculated that Trump’s antagonistic trade and foreign policy has reduced global demand for Treasurys, the world’s most widely held sovereign debt. China is one of the largest holders of U.S. debt, and some experts warn it could wreak havoc on the Treasury market by dumping bonds.
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