President Trump reacted to the rising yield on the 30-year bond, which hit 5%, by announcing a 90-day pause on reciprocal tariffs for most countries, leaving China with additional fees. This decision led to a significant single-day market rally, though US equities later gave back half of those gains. The bond market has shown signs of distress, evidenced by the SOFR/IORB spread turning positive outside of usual financial periods. Recent economic data, such as a negative CPI print, failed to have a typical positive effect on bond markets, indicating deeper issues at play. Trump’s pivot might provide only temporary relief as fundamental challenges in the bond markets continue to persist.

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