US yields plunge as Trump tariffs trigger flight to safe havens

Trump’s tariffs stoke recession fears, impacting global markets

Yields on U.S. Treasuries drop significantly amid economic concerns

Gauge of services sector hits nine-month low

NEW YORK, – U.S. Treasury yields tumbled on Thursday, after U.S. President Donald Trump announced larger-than-expected tariffs on a global scale, greatly stoking recession fears and sending investors scurrying into safe havens.

Trump on Wednesday revealed his long-anticipated tariffs plan, which included a 10% minimum tariff on most goods imported into the United States, with much higher duties on products from dozens of countries. Stocks around the globe plunged, currency markets were upended and bond yields plummeted.

The yield on the benchmark U.S. 10-year Treasury note fell 15.3 basis points to 4.042% after falling to a 4.004%, its lowest since October 16. The yield on the note was on track for its biggest daily drop since August 2.

“The market looks like it’s pricing in now maybe three cuts this year and obviously the long-end is pricing in a real decline in economic activity,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research in New York.

“You can count on a fair amount of volatility. My guess is there will be somebody who comes off of the administration and tries to paint a different, a softer picture of this, and we probably get a snap back, but until there’s actually a change in the policy or evidence of real negotiations going on, the market’s going to be under pressure.”

Yields briefly extended declines after data from the Institute for Supply Management showed its non-manufacturing Purchasing Managers Index dropped to 50.8 last month, the lowest reading since June 2024, well short of the 53 estimate of economists polled by Reuters and the 53.5 in February.

The yield on the 30-year bond fell 8.1 basis points to 4.47% after falling to 4.431%, a fresh one-month low.

Yields have moved lower over the past few months and equities have struggled as recent data have shown a notable weakening in consumer sentiment and growing inflation expectations as investors braced for the tariff announcements.

Concerns that the tariffs could cause price pressures to increase while stunting economic growth, prompting a stagflation environment, have also grown.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 30.7 basis points.

Goldman Sachs recently raised the probability of a U.S. recession to 35% from 20% and said it expects more rate cuts, while J.P. Morgan’s chief economist previously saw about a 40% chance of a recession in the world’s largest economy this year.

Markets have been slowly pricing in the possibility of more rate cuts from the Federal Reserve this year, which increased after Trump’s tariffs were released.

Traders are now pricing in 84 basis points of interest rate cuts by the end of the year, LSEG data showed, although comments by some Federal Reserve officials have suggested the Fed will be deliberate in adjusting rates lower.

Expectations for a cut of at least 25 basis points at the central bank’s June meeting have also increased to nearly 80%, according to CME’s FedWatch Tool, up from about 67% in the prior session.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 17.3 basis points to 3.729% after stumbling to a six-month low of 3.647%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities was last at 2.548%, its lowest since March 21, after closing at 2.586% on April 2.

The 10-year TIPS breakeven rate was last at 2.283%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

Thursday’s moves in U.S. Treasuries were in sync with their global peers as investors hustled to assets perceived to have less risk.

In Europe, German 10-year Bunds was down 8.7 bps on the day to 2.637%, its lowest in a month and the day before the government reached a historic spending plan.

In Tokyo, the 10-year Japanese government bond yield fell more than 15.3 bps to 1.316%, its lowest since February 12.

This article was generated from an automated news agency feed without modifications to text.