Traders are active on the floor of the New York Stock Exchange (NYSE) as of April 09, 2025, in New York City.
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At midday in London (7 a.m. ET), the yield on the 2-year Treasury fell by 8 basis points as the 30-year dropped by 4 basis points, while the 10-year bond—experiencing its most turbulent period in two decades—declined by 9 basis points.
Trump mentioned he has been “observing” the bond market, which is known to impact political leaders trying to implement significant economic reforms. He referred to it as “very tricky,” admitting “people were becoming a bit uneasy.” With his tariff strategy seen as potentially inflationary, a continued increase in yields might result in a mix of rising prices, elevated borrowing costs, and possibly weaker economic growth or even a recession.
Meanwhile, bond yields in other regions also fluctuated on Thursday alongside a recovery in the stock market across Europe and the Asia-Pacific.
German bond yields saw an overall increase after being drawn earlier in the week to safe havens. The yield on Germany’s 2-year bund rose by 13 basis points, while the 10-year increased by 6 basis points.
The U.K., under pressure from investor anxiety regarding its fiscal future, experienced significant volatility this week. The yield on U.K. 30-year bonds, which surged up to 30 basis points on Wednesday, ended approximately 25 basis points higher, marking its highest closing level since 1998, before dropping 16 basis points.
“The 90-day pause was sufficient to halt the gilt sell-off in the long end,” stated Sanjay Raja, chief U.K. economist at Deutsche Bank Research, in a conversation with CNBC.
“Much like what we observed in the U.S. yesterday, long-term bonds are rallying today, likely due to a shift in market sentiment regarding Trump’s reciprocal tariffs. And given the pause, markets are justifiably assuming that reinstatement at prior levels will be difficult. There is an overall sense of relief that trade negotiations with the U.S. are firmly back on the agenda.”
John Higgins, chief markets economist at Capital Economics, indicated that one factor contributing to the reversal in the bond market on Thursday was a renewed evaluation of monetary policy’s trajectory.
“Expected [U.S.] interest rates have seen a slight uptick today, as the latest developments from the White House have lessened recession risks,” Higgins remarked to CNBC.
“Another contributing factor may be that previous sell-offs in long-dated Treasuries and Gilts could have been driven by profit-taking or even forced liquidations by leveraged investors as equity markets dropped. Consequently, there was potential for their yields to decline as the stock market improved and the need for such measures diminished.”
Despite the change in sentiment, significant uncertainty persists regarding whether, and under what conditions, countries can reach agreements with the U.S. and how China will react, he added.
In the meantime, as much of the recent volatility seems linked to the stock market, movements may continue to be more pronounced given the uncertainty surrounding forthcoming developments, Higgins noted.
The bond market has shown a relatively stable pattern in Asia. On Thursday, Japanese 10- and 2-year yields escalated by 7 and 5 basis points, respectively, as investors flocked to stocks. Australia’s 2-year, which significantly decreased since the initial tariff announcement last week, saw an increase of 2 basis points.
In a note, the Asian fixed income team at Nikko Asset Management expressed their belief that Asian government bonds are well-suited for strong performance, “backed by supportive central banks in an environment of manageable inflation and slowing growth.”
“Fears regarding potential growth shocks from U.S. tariffs are expected to offer additional support for regional bond markets. Furthermore, with considerably high FX reserves, policymakers are adequately prepared to safeguard their currencies if needed.”
