Global markets calmed after recent trade tensions, but a new concern has emerged: the US bond market. Yields on US government bonds have surged, while bond values dropped. This rare move signals that investors are losing confidence in the US economy. Even President Trump had to adjust his trade plans due to this pressure. Though bonds may seem technical, their sudden change could affect interest rates, jobs, and daily life. EuroNews24 explains what’s happening and why it matters for everyone.
What Are Government Bonds – and Why Do They Matter?
Government bonds are like IOUs. Countries borrow money and agree to pay interest over time. In the US, they’re called “Treasuries.”
Big investors like pension funds and central banks buy these bonds because they are seen as safe. Usually, bond prices don’t change much. But in early April, something unusual happened: bond prices dropped fast, and yields jumped sharply.
What Caused the Bond Market Shock?
After the US introduced new tariffs in early April, investors briefly turned to bonds for safety. But this changed quickly.
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Tariffs took effect on April 5.
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President Trump said he would stick to his plan.
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Investors began selling bonds rapidly.
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The 10-year yield rose from 3.9% to 4.5%.
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The 30-year yield neared 5% — a major move in bond markets.
Even a 0.2% shift is seen as big in this space, so these jumps were dramatic.
Why Are Yields Rising So Fast?
When investors feel uncertain, they ask for higher interest to lend money — to cover the extra risk. The new tariffs made people worry about the US economy. So, they stopped buying bonds unless they paid more interest.
This is not just a financial market issue — it can hit the wider economy too.
Impact on People and the Economy
Higher bond yields mean the US must pay more to borrow money. This puts pressure on the government’s budget. There may be less money for public services like schools, healthcare, and roads.
Ordinary citizens also feel the effects:
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Mortgages and loans become more expensive.
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Small businesses may struggle to get credit.
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Housing prices could drop as fewer people can afford to buy homes.
“When government borrowing rates rise, mortgage and loan costs go up too,” explains John Canavan from Oxford Economics.
Homeowners with long-term fixed rates may be safe for now. But new loans or expansions are harder to finance when credit is costly.
Trump Changes Course Under Bond Market Pressure
At first, President Trump told Americans to “stay strong.” But the bond market’s reaction led to a major shift. He delayed part of the new tariffs for 90 days — except those on China.
While the 10% tariff remains, this pause shows that financial pressure works.
“Trump ignored stock losses, but he changed when bonds reacted,” said Paul Ashworth of Capital Economics.
Reports say Treasury Secretary Scott Bessent urged Trump to act, after many business leaders voiced concern.
A Reminder of the UK Bond Crisis in 2022
The situation reminds analysts of the UK’s 2022 bond crisis. Then, Prime Minister Liz Truss announced unfunded tax cuts. Markets panicked, and the Bank of England had to step in to rescue pension funds.
Some feared the US Federal Reserve might need to do something similar if the sell-off got worse. Though yields have cooled slightly, they remain high.
Jonas Goltermann from Capital Economics warns that a “risk premium” is now built into US bonds — a sign that damage has already been done.
What About China?
China owns a large amount of US bonds, second only to Japan. Some wondered if China caused the sell-off as revenge for new US tariffs.
But experts doubt it. If China sold many bonds, it would hurt its own finances too. Capital Economics says such a move would likely harm China more than the US.
So, China’s role remains quiet — but important.
The US bond market rarely makes headlines, but this time is different. Rising yields affect government spending, interest rates, housing, and business growth. When investors lose trust, it creates a chain reaction that touches everyone.