Trump Administration Announces 90-Day Tariff Pause Amid Bond Market Strain
The bond market is experiencing significant stress, marked by the yield on the 30-year bond rising to 5%. Key points include:
- The bond market showed signs of strain, with a notable increase in the 30-year bond yield.
- The SOFR/IORB spread turned positive for the first time since quantitative tightening began, indicating funding market stress.
- President Trump announced a 90-day pause on reciprocal tariffs, excluding China, leading to a major rally in US equities.
- Despite the tariff pause, the overall economic impact remains largely unchanged, transferring risk back to China.
- US equities have retraced half of their gains from the previous day’s rally.
- Recent CPI data indicated the first negative month-over-month inflation print since 2020, yet bonds sold off, revealing underlying issues in the bond market.
- Trump's tariff pivot provided short-term relief but did not address fundamental market challenges.