The bond market sell-off escalated Friday to cap off one of the most volatile and unusual trading weeks in recent memory as President Trump’s tariff whipsaw sent yields surging and stocks plummeting.
Long-term Treasury yields ripped higher, with the 10-year yield (^TNX) surging to its highest level since February to trade at around 4.53%, a massive 66 basis point swing from Monday’s low of 3.87%.
According to data compiled by Yahoo Finance, the 10-year has logged its biggest week since November 2021.
Similarly, the 30-year yield (^TYX) jumped 7 basis points to trade near 4.92% — the highest level since January but the biggest weekly surge for the 30-year yield since 1982.
Yields and bonds are inversely correlated, meaning higher yields equal falling bond prices.
The bond market serves as a “cash collateral” of sorts to investors who can then borrow money and bet on riskier assets like stocks. It’s also viewed as a safe haven during times of uncertainty, which has been the word du jour as Wall Street remains on edge that shifting trade dynamics could induce a recession.
Wall Street analysts have floated several theories to explain recent yield volatility, from sticky inflation and a cautious Federal Reserve to an investor shift from bonds to cash.
The unwinding of the basis trade, a highly levered trading strategy most often used by hedge funds, along with greater concerns that foreign investors are selling their US Treasurys have also been top concerns.
But the sharp rise could be an unsettling fundamental shift, especially in combination with the performance of another safe haven asset: The US dollar.
On Friday, the US Dollar Index — which measures the dollar’s value relative to a basket of currencies (the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc) — briefly plummeted below the psychological 100 mark, hitting its weakest point since April 2022.
As of 3:50:40 PM EDT. Market Open.
And as concerns mount over the health of the US economy, rising skepticism over the stability of traditional safe-haven assets may trigger broader disruptions throughout the entire financial system
“I do think it’s severe,” Marc Chandler, global forex chief market strategist at Bannockburn, told Yahoo Finance when asked about the sell-off in the US dollar and bond market. “People are concerned that maybe we’re seeing a capital strike against the US, where large pools of capital are selling US assets and taking their money home.”
In others words, a possible “sell America” trade could be brewing. President Trump has taken notice.
In the lead-up to the president’s pivot on reciprocal tariffs, Trump specifically referenced the stark spike in yields: “The bond market is very tricky. I was watching it,” he told reporters shortly after the announcement. “People were getting a little queasy.”
That queasiness continued throughout the week as trade tensions escalated between the US and China.
On Friday, Beijing responded to the 145% tariff rate the US implemented on Chinese imports by raising its duties on US goods to 125%.
Kathy Jones, chief rates strategist at Charles Schwab, told Yahoo Finance the whipsaw market developments and subsequent trade policy shifts will likely keep yields elevated in the near-term.
And the world, just like the president, is paying close attention.
“Welcome to the world where bonds rule,” she said. “You can do a lot of things. But when the bond market tells you you’re wrong, then you’ve got a problem.”
Jones noted that bonds are closely connected to several key aspects of the market, such as stock valuations, borrowing costs, interest rates, and overall financial conditions.
“When that goes wrong, you pretty much have everything wrong. That’s the lesson,” she said. “And the market will tell you when you’re wrong by blowing everything up.”
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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