President Trump hit the pause button on reciprocal tariffs — and the bond market convinced him.
In the lead-up to the president’s pivot, markets were unraveling: Stocks slid sharply, with the S&P 500 on the brink of a bear market. But the real alarm bell? A sharp, unexpected surge in long-term Treasury yields — a move that seemed to force the president’s hand.
“The bond market is very tricky. I was watching it,” Trump admitted to reporters shortly after the announcement. “People were getting a little queasy.”
At its highs of the week on Wednesday, the 10-year yield (^TNX) traded at 4.47%, a massive 60 basis point swing from Monday’s low of 3.87% and the biggest three-day jump since December 2001.
Notably, Wednesday’s surge pushed the 10-year yield back to late-February levels, an unsettling signal for a president who has long pressed for lower rates. The 30-year Treasury yield faced a similar trajectory, jumping as much as 25 basis points this week to hit its highest level since November 2023. At its peak, the three-day jump marked the steepest climb in long-term yields since the 2020 pandemic shock.
The 10-year yield slightly retreated Thursday following Trump’s pivot, but the relief was short-lived. Shortly after the market close, yields were back around 4.4%.
“Welcome to the world where bonds rule,” Kathy Jones, chief rates strategist at Charles Schwab, told Yahoo Finance of the whipsaw market developments. “You can do a lot of things, but when the bond market tells you you’re wrong, then you’ve got a problem.”
Jones noted that bonds are closely connected to several key aspects of the market, such as stock valuations, borrowing costs, interest rates, and overall financial conditions.
“When that goes wrong, you pretty much have everything wrong. That’s the lesson,” she said. “And the market will tell you when you’re wrong by blowing everything up.” louder.
Early Wednesday, JPMorgan CEO Jamie Dimon cautioned on Fox Business that a tariff-induced recession was becoming increasingly “likely,” adding that the negative market reaction “could get worse if we don’t make some progress” on negotiations.
Trump took notice. He directly referenced Dimon’s interview later that day, calling him “very smart and very genius financially.” According to sources cited by the Wall Street Journal, the president was watching Fox Business in real-time and asked aides to reconsider the full scope of the planned tariff hikes shortly afterward.