Peter Smith
U.S. Treasury yields jumped significantly with the 10-year yield tracking its largest weekly increase in decades amid escalating global trade tensions, while gold prices reached new record highs and the dollar fell against major currencies.
Treasury Yields See Biggest Weekly Increase Since 2001
U.S. Treasury yields climbed higher on Friday, with 10-year yields on pace for their most substantial weekly rise in more than two decades. The 10-year note yield increased by 10.3 basis points to 4.495% and touched 4.592%, the highest level since February 13. According to analysts, this remarkable surge represents the largest weekly increase for Treasury yields since 2001.
The dramatic movement in the bond market appears to be driven by large-scale liquidation as hedge funds and asset managers offloaded bonds following margin calls and significant losses resulting from market volatility. Despite strong auctions of 10-year and 30-year debt on Wednesday and Thursday that provided some stabilization, many investors remain hesitant to purchase bonds until liquidity conditions improve further.
Global Trade War Pressures Treasury Yields as China Retaliates
Beijing escalated tensions on Friday by increasing tariffs on U.S. imports to 125%, a direct response to U.S. President Donald Trump's earlier decision to raise duties on Chinese goods. This latest development in the ongoing trade conflict has added to market turbulence that began when Trump announced sweeping tariffs on April 2.
"Trump continues to dominate the headlines and the financial markets, especially as we get into this period of negotiating tariffs," noted Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "There will be lots of rumors and posturing," he added, highlighting the uncertainty that continues to pervade market sentiment.
The impact of the trade war has extended beyond U.S. markets, affecting global bonds as well. Euro zone bond yields eased, while the premium demanded by Treasury holders over German Bunds rose by the most in a week since the 1990s, reflecting the divergent monetary policy expectations and risk perceptions between the regions.
Stock Market Rallies Despite Treasury Yields Turbulence
Despite the bond market turmoil, U.S. stock indexes showed resilience, rising more than 1% on Friday. Bank shares performed particularly well following mostly positive earnings reports. JPMorgan Chase shares increased by 4% as the banking giant, along with Morgan Stanley and Wells Fargo, generally exceeded analyst forecasts for the first quarter.
The Dow Jones Industrial Average rose 620.70 points (1.60%) to 40,214.36, the S&P 500 gained 88.97 points (1.72%) to 5,357.02, and the Nasdaq Composite added 295.97 points (1.81%) to 16,683.29. Globally, MSCI's gauge of stocks across the world rose 10.95 points (1.41%) to 790.22, while the pan-European STOXX 600 index ended slightly down by 0.1%.
Dollar Weakens as Treasury Yields Rise and Safe Havens Gain
The U.S. dollar extended its losses against the Swiss franc from the previous session, plummeting to its lowest level since January 2015. Against the Swiss franc, the dollar weakened 0.72% to 0.817. The greenback also hit a three-year low versus the euro, reflecting shifting investor sentiment amid the escalating trade tensions.
Meanwhile, gold continued its impressive rally, with spot prices rising 2% to $3,236.67 an ounce after reaching a record high of $3,243.82 earlier in the session. The precious metal has gained over 6% this week as investors seek safe-haven assets amid geopolitical uncertainty and market volatility.
Economic data released on Friday added to the complex market picture, with reports showing U.S. consumer sentiment deteriorating sharply in April and U.S. monthly producer prices unexpectedly falling in March. These indicators suggest potential economic challenges ahead as the trade war continues to unfold.
With the trade conflict casting a shadow over the economic outlook, market participants will be closely monitoring whether U.S. companies continue to provide forward guidance during the ongoing earnings season, which could offer valuable insights into how businesses are navigating the current turbulent environment.
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Peter Smith
