Bond Market Weakens Confidence in U.S., Investors Warn

The bond market’s reaction to President Donald Trump’s tariffs this week alarmed investors and sparked fears of an emerging financial crisis.

Concerns over the bond market’s instability—and fears about a 10-year Treasury auction, which ultimately went smoothly—contributed to Trump’s decision to pause the tariffs.

While the immediate turmoil has eased, the concerns that forced the administration to revise its plans could easily return if the White House continues to push forward with tariffs, Matt Peterson reported for Barron’s Daily.

The 10-year Treasury yield rose by a quarter of a percentage point in the six days after the scope of the tariffs became known, while the 30-year yield jumped by a third of a point—significant moves in the bond world.

The resulting market turmoil forced hedge funds to unwind positions.

The $28.6 trillion Treasury market is the lifeblood of the global financial system. Central banks and private institutions hold large quantities of Treasuries of all maturities, and short-term Treasury debt is treated like cash.

The bond selloff signaled a decline in confidence in the U.S. itself.

Concerns over the bond market’s instability—and fears about a 10-year Treasury auction, which ultimately went smoothly—contributed to Trump’s decision to pause the tariffs, a White House official told Barron’s on condition of anonymity.

But observers saw a dangerous situation that nearly spiraled out of control. Trump’s tariff policy—the centerpiece of his economic agenda—now faces a powerful counterweight that will be hard for the president to ignore.

The market knows it, and so does China, which holds hundreds of billions of dollars in U.S. Treasuries.

A bond investor who regularly interacts with the Treasury told Barron’s that investors fear lasting damage to confidence in the U.S. financial system, especially amid federal budget cuts affecting staff at the Treasury and other financial oversight agencies.