US Treasury Yields Slide as Markets Brace for Economic Slowdown

The yield on the US 10-year Treasury note tumbled below 4% on Friday, April 5, marking a six-month low, as growing fears of a global recession sent investors rushing into safe-haven assets.

Tariffs Stoke Economic Uncertainty

President Donald Trump’s sweeping import tariffs have rattled financial markets, with investors worried about trade retaliation and slower economic growth.

The latest trade measures include:

• A baseline 10% tariff on all imports, effective April 5

• Steeper levies on China (54%), the European Union (20%), Japan (24%), India (27%), and Vietnam (46%)

With higher import costs expected to push inflation up and economic growth down, traders are increasingly pricing in Federal Reserve interest rate cuts.

Markets Bet on Aggressive Fed Rate Cuts

Bond yields typically fall when investors expect lower interest rates, and the latest market moves suggest that traders are bracing for a dovish shift in Fed policy:

• The first rate cut is now expected in June, with three more 25-basis-point cuts anticipated in 2025.

• Higher tariffs could weigh on US economic growth, pushing the Fed to ease monetary policy sooner than expected.

• Lower yields reflect growing investor demand for safer assets, as equity markets face heightened volatility.

Conflicting Signals from Trump Add to Volatility

Trump’s tariff announcement initially spooked markets, but later in the day, he signaled openness to trade negotiations, contradicting earlier statements from his administration.

This policy uncertainty has fueled market swings, with traders unsure about the long-term impact of Trump’s trade strategy.

Jobs Report in Focus

The next key event for bond markets will be Friday’s US nonfarm payrolls report, which could further influence Fed rate expectations:

• Stronger-than-expected job growth could slow the bond rally by delaying rate cuts.

• Weaker employment data would reinforce fears of an economic slowdown, likely pushing yields even lower.

Outlook: How Low Can Yields Go?

With recession fears, Fed rate cut bets, and global trade tensions dominating investor sentiment, analysts suggest that US Treasury yields could fall further in the coming months.

For now, all eyes remain on economic data and Fed commentary to determine the next move in the bond market.

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