The U.S. bond market is under pressure following the Trump administration’s tariffs, which triggered a sharp selloff in Treasuries.
The 10-year yield has risen to around 4.47%, while the 30-year nears 5%, reflecting a significant shift from the more stable levels seen earlier this year.
A major factor behind the spike is hedge funds’ forced unwinding of basis trades. These leveraged trades, which exploit price differences between Treasury futures and cash bonds, have come under stress amid rising volatility and margin calls, accelerating the selloff.
The tariffs have also reignited inflation concerns. Higher import costs are expected to drive up consumer prices, prompting investors to demand higher yields to offset the anticipated erosion of purchasing power. This has complicated the Fed’s policy outlook, which now must address inflation risk while avoiding a deeper economic slowdown.
Adding to the pressure are concerns that foreign holders of U.S. debt—particularly China—may cut back on Treasury purchases in response to the tariffs, weakening demand and pushing yields even higher.
The yield surge highlights the market’s sensitivity to policy shocks and leverage-driven flows. It also shows the broader economic risks of aggressive trade actions in a fragile macro environment.
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