Bond Market Pushes Back on Rate Cuts as 10-Year Yield Hits 4.36%

• 10-yr US Treasury yield hits 1-mo high (4.36%) amid tariff hike, inflation fears
• Yield surge challenges Fed rate cut hopes; foreign buying concerns (China) mount
• Context: Bond market reprices risks (tariffs, supply, demand) vs prior rate optimism

Renewed US-China trade tensions under the Trump administration, dubbed by some as “Tariff War 2.0,” coincided with a sharp rise in the benchmark 10-year U.S. Treasury yield this week. The yield climbed to 4.36% , reportedly jumping significantly in just two days to reach its highest level in over a month.

The spike suggests increased borrowing costs and growing investor unease regarding inflation and the large supply of government debt hitting the market.

Why Are Yields Suddenly Rising?

The yield surge also marks a shift in investor sentiment after weeks of relative calm in the bond market. Stubborn inflation fueled bets on the Federal Reserve keeping rates higher for longer, contributing to upward pressure on yields. 

Traders are now reassessing the timeline for potential Fed rate cuts, which had been aggressively priced in just weeks ago. 

Related: ‘Ignore China At Your Peril’: Ben Zhou Flags Yuan Devaluation’s BTC Impact

Strong Demand, High Yields at US Treasury Auction

Adding to the pressure, the U.S. Treasury Department held a $58 billion auction of three-year notes Tuesday – the first major debt issuance since the latest tariff news. While demand appeared reasonably strong, the auction cleared at an elevated yield, suggesting that investors are demanding more compensation to hold U.S. debt in a volatile macro environment. 

The prospect of higher import costs from the additional tariffs also influenced inflation forecasts.

Related: BlackRock CEO Sees Economy Weakening, Warns Trump’s Actions Could Ignite Inflation

Are Foreign Buyers Stepping Back?

Concerns are also mounting that key foreign buyers, especially China and Japan, could be reducing their U.S. debt holdings. China reportedly sold $50 billion in U.S. Treasury bonds, an action that can contribute to higher yields by reducing demand. Also, South Korea announced an aid package aimed at buffering shocks from global economic friction.  

While the White House hasn’t detailed further tariff plans, President Trump previously warned that initial actions might be “just the beginning.“

What Does This Mean for Markets and Policy

Such a rapid shift higher in benchmark yields puts downward pressure on riskier assets—including crypto—and generally tightens financial conditions. 

The 10-year yield influences mortgage rates and corporate borrowing costs, which impacts everything from housing demand to business investments.

What does it mean: This isn’t just market noise; it represents the bond market’s forceful repricing of multiple risks—inflation heightened by tariffs, debt supply, and uncertain foreign demand—against earlier, perhaps overly optimistic, expectations for Federal Reserve rate cuts.