During intraday trading overnight, U.S. President Donald Trump announced via social media that he has authorized a 90-day suspension of tariffs on select countries, during which tariffs will be lowered significantly to 10%.
The announcement triggered a strong rebound in U.S. equity markets:
The S&P 500 surged 9.5%,
The Nasdaq Composite jumped 12%,
marking their best single-day performances since 2008 and 2001, respectively.
However, the U.S. Treasury market responded more tepidly. The 10-year Treasury yield, which had risen over 20 basis points earlier, gradually gave back gains following Trump’s post, and settled at 4.2812% by 11 a.m. — still more than 20 bps above pre-announcement levels.
Previously, in the wake of intense selling pressure, the 10-year yield had spiked nearly 40 basis points over two days, peaking near 4.5%, while 30-year yields surpassed 5%, raising concerns of systemic financial risk.
According to Zhang Yu, Chief Economist at Huachuang Macro Research, the fragility of the U.S. Treasury market stems from three primary factors:
Highly leveraged basis trades by hedge funds,
Limited buffer capacity among broker-dealers,
A surge in Treasury supply.
The recent Treasury sell-off, Zhang emphasized, is not driven by economic optimism, but rather by a simultaneous decline in risk and safe-haven assets — a clear indication of tightening short-term liquidity. This reflects how tariff policies have evolved from affecting risk sentiment to creating liquidity shocks.
CITIC Securities’ fixed income team attributed the Treasury volatility to weak demand at a recent 3-year Treasury auction. This weakness spread to upcoming 10- and 30-year bond auctions, and forced leveraged institutions to unwind basis trades, exacerbating market instability.
Despite the temporary easing of tariff plans, bond market corrections have only retraced half of the moves seen after the original “reciprocal tariffs” announcement, signaling lingering risks and policy uncertainty.
Some analysts suggest the Fed is releasing liquidity through bond purchases while hedging duration risk via short futures positions. This duration-neutral strategy, combined with deleveraging across markets, has intensified concerns about inflation and oversupply in the Treasury market.
Citigroup noted in a client report that tariff suspensions do not guarantee protection from economic slowdown or rising inflation in the U.S.
Meanwhile, China has been steadily reducing its holdings of U.S. Treasuries since 2012 — down from a peak of $1.25 trillion to under $800 billion, shifting its reserves into gold and other assets. Currently, the top three holders of U.S. Treasuries are Japan, China, and the United Kingdom.
[Source – 上海有色网] 暂停部分国家关税，10年期美债收益率震荡重回4.3%下方，但美债抛售压力仍大 https://news.smm.cn/news/103271817
