U.S. President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., U.S., April 2, 2025.
Carlos Barria | Reuters
U.S. Treasury yields dropped again on Monday as President Donald Trump’s tariffs spurred a flight to safety while riskier markets took a hit.
The 10-year Treasury yield fell 1 basis point at 3.979%. The 2-year Treasury yield dropped around 8 basis points to 3.584% and hit its lowest level since September 2022.
One basis point equals 0.01%. Yields and prices move in opposite directions.
Investors are reeling from the impact of the Trump tariffs unveiled last week, which hit over 180 countries and set a baseline tariff of 10% across the board. Major trading partners of the U.S. took some of the steepest tariffs, with China facing a total tariff rate of 54%.
The tariffs have stoked fears of a global trade war, as countries respond with their own tariffs on the United States. China retaliated Friday by slapping 34% tariffs on U.S. goods, and the EU has vowed to impose countermeasures if negotiations fail.
Trump continued to downplay the impact of tariffs, saying on Sunday evening, “I don’t want anything to go down, but sometimes you have to take medicine to fix something.”
Traders ratcheted higher their expectations for lower Federal Reserve rates and now see the central bank cutting rates at least five times in 2025, per fed funds futures.
However, “Unless the functioning of financial markets, such as the flow of credit, begins to seize up, there isn’t much the Fed can do,” Bankrate chief financial analyst Greg McBride wrote in a note on Sunday. “An emergency rate cut would do little and could fuel further panic. Any boost to sentiment could also be fleeting amid such uncertainty.”