Over the past week, U.S. Treasuries and the U.S. dollar—traditionally regarded as “safe-haven assets”—have faced synchronized sell-offs. The yield on the 10-year U.S. Treasury note briefly surged to 4.5%, while the 30-year Treasury yield surpassed 5%, marking its highest level since 2007. Concurrently, the U.S. Dollar Index (DXY) fell below the critical 100 threshold.
The immediate catalyst for this market turbulence stems from the Trump administration’s erratic tariff policies. Last week, former President Trump announced plans to impose a 10% “baseline minimum tariff” on trading partners, with higher levies targeting specific nations. However, within three days, the White House abruptly reversed course, declaring a 90-day suspension of reciprocal tariff measures. This policy volatility has amplified market risk aversion, accelerating capital outflows from dollar-denominated assets.
These developments may signal a broader shift in investor sentiment away from U.S. assets. Historically, global investors have viewed the United States as the premier investment destination, a dynamic that typically correlates with trade deficits. The current decline in yields across U.S. asset classes could reflect this paradigm. Should trade deficits contract significantly, it might prompt market participants to reassess America’s status as the world’s most attractive investment hub, potentially driving bond yields upward.
Despite mounting pressures, current market operations show no signs of “severe dysfunction.” The Federal Reserve’s primary focus remains anchored on maintaining stable inflation expectations. Policymakers are unlikely to initiate rate cuts until greater clarity emerges regarding the trajectory of the Trump administration’s fiscal and trade policies.
Post time: Apr-12-2025