Carney's Checkmate: How Canada's Quiet Bond Play Forced Trump to Drop Tariffs

[UpInArms]

2. Explainer: What just happened in the U.S. Treasury market?

LONDON, April 10 (Reuters) - U.S. President Donald Trump's decision to pause the hefty duties he had said he would impose on dozens of countries one week ago followed turmoil in financial markets that included an acute selloff in the $29 trillion Treasury market.

Trump said on Wednesday the bond market had recovered well after investors became queasy about it in reaction to his tariff announcements.

"The bond market now is beautiful," he told reporters.

The selloff is the latest sign of the power of government bond markets to act as a restraint on policymakers, while talk of a return of so-called bond vigilantes has risen in recent years.

WHAT HAPPENED IN BOND MARKETS THIS WEEK?

In short, the U.S. Treasury market -- a central pillar of the global financial system -- came under heavy selling pressure, sending 10-year borrowing costs surging.

At one-point, 10-year bond yields were set for their biggest weekly jump in more than a decade. Bond yields move inversely to the price. Trading at 4.27% on Thursday, those yields are comfortably below Wednesday's peak of 4.51% . They are also well below the high of almost 5% hit in late 2023 and the double-digit levels seen in the 1980s.

Notably, this jump was a sharp reversal of the initial fall seen after Trump's sweeping tariff announcement last week that raised U.S. recession risks and expectations for rate cuts.

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