The U.S. bond market is experiencing significant pressure following the tariffs imposed by the Trump administration, resulting in a sharp selloff in Treasuries.
The 10-year yield has spiked to approximately 4.47%, while the 30-year yield is nearing 5%, marking a stark departure from the stable levels seen earlier this year.
Hedge Fund Unwinding and Rising Inflation Fears
One of the major contributors to this yield surge is the forced unwinding of basis trades by hedge funds. These leveraged trades, which typically exploit price differences between Treasury futures and cash bonds, are facing immense stress amid rising market volatility and margin calls, which have only accelerated the selloff. This situation has intensified concerns about inflation as higher import costs, driven by the tariffs, are expected to push consumer prices higher. This, in turn, is prompting investors to demand higher yields to compensate for the anticipated erosion of purchasing power.
Market Sensitivity and Impact of Foreign Buyers
In addition to the domestic pressures, there are growing concerns that foreign holders of U.S. debt, particularly China, may reduce their purchases of U.S. Treasuries in response to the tariffs. Such a move could further weaken demand and drive yields even higher. This surge in yields highlights the market’s sensitivity to policy shocks and the potential economic risks associated with aggressive trade actions in an already fragile macroeconomic environment.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/u-s-bond-market-faces-pressure-as-tariffs-spark-treasury-selloff/