US Treasuries Fall on Signs That Trump Will Dilute April Tariffs

Link copied

US Treasuries Fall on Signs That Trump Will Dilute April Tariffs.

general :: 2025-03-25 :: source - bloomberg

By Alice Gledhill and Ye Xie

(Bloomberg) -- US Treasuries fell on Monday, a sign that investors are favoring riskier assets after President Donald Trump indicated that tariffs arriving next month will be more targeted than anticipated.

Most Read from Bloomberg

The yield on the 10-year note rose 8 basis points to 4.33%, and the benchmark was trading around its session high late in New York, while major US stock indexes rallied more than 1%. The shift away from Treasuries picked up steam after the US Purchasing Managers’ Index pointed to growing strength in the service industry, which overshadowed a contraction in the manufacturing sector in March.

Trump is set to roll out plans for universal, reciprocal trade tariffs on April 2 — a date he’s referred to as “liberation day.” Trump’s comments on Monday validated an earlier Bloomberg report suggesting that the levies may be narrower in scope than initially expected, which helped temper some of the market’s fears about the impact on global trade and growth.

The bond market remained under pressure from block trades in Treasury futures after Trump said late Monday that he may give “a lot of countries” breaks on tariffs, and will also announce tariffs on automobile imports in the coming days.

The news of targeted tariffs “appears to be driving a rebound in sentiment,” said Gennadiy Goldberg, head of US interest rate strategy at TD Securities. But with the heightened uncertainties, “markets are truly on a razor’s edge here.”

Follow The Big Take daily podcast wherever you listen.

At the start of as busy week for central bank speakers, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, told Bloomberg News that he sees just one interest-rate cut as likely this year, rather than two, as new tariffs slow the fight against inflation.

Traders accordingly pared their bets on the number of cuts the Fed will deliver this year. Interest-rate swaps showed traders pricing in a total of 60 basis points of easing by year-end, compared with 68 basis points on Friday.

Adding to the bearish sentiment, a seller of 7,000 contracts in two-year bond futures stood out during the trading session Monday.

US 10-year Treasuries have traded in a fairly narrow range in March after the yield retreated from the year’s high of about 4.80% in mid-January. Trump’s tariff and trade-war threats have sparked fears of a recession, pushing investors out of stocks and into the safety of bonds.

Despite Monday’s weakness, investors including Nicolas Jullien, global head of fixed income at Candriam, expect US yields to retreat further as data suggest eroding confidence in the nation’s economy.

“Surveys are also seeing downtrends as trade uncertainty is peaking and impacting investor confidence,” Jullien said. “We do see a downward trend on US 10-year rates and in the event of a risk-off scenario brought on by a continued downturn in markets.”

Reinforcing that view is Treasury Secretary Scott Bessent’s campaign to push down bond yields, which has led some rates strategists at major banks to cut their year-end forecasts for yields.

“The softening of tariff talk may indicate the ‘Trump put’ on equity market may still apply, in addition to the ‘Bessent put’ on Treasuries,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management.

--With assistance from Edward Bolingbroke, Kristine Aquino and Nathaniel Popper.

(Updates with Trump tariff news, Fed’s Bostic starting from third paragraph.)