FX.co ★ US 10-Year Treasury Sells Off

On Wednesday, the yield on the US 10-year Treasury note experienced an increase of up to 20 basis points, reaching 4.5%, before settling at 4.4%. This movement occurred following a more robust-than-anticipated auction of 10-year notes, which mitigated the effects of subdued demand from primary dealers earlier in the month. Nevertheless, the continuing bond selloff highlighted growing investor unease. This anxiety was exacerbated by the impact of Trump's reciprocal tariff measures, further intensified by China’s decision to implement an additional 50% retaliatory tariff and the European Union's approval of tariffs directed at €21 billion in US goods. Additionally, there have been reports suggesting foreign investors are selling off US Treasuries, coupled with indications of a broader shift towards cash holdings as some investors liquidate positions. These factors contribute to worries that US bonds might be losing their longstanding status as a safe-haven asset. Major holders of US Treasuries—Japan, China, and the United Kingdom—are among the countries most affected by US tariffs and are likely to have participated in the auction. The escalation of tariffs has heightened fears of a potential recession and raised concerns over inflation, which could constrain the Federal Reserve’s capacity to implement policy easing.