Yields rise as US/China trade deal punishes safe-havens

NEW YORK – US Treasury yields rose on Monday to the highest levels in a month after the United States and China agreed to lower trade tariffs on one another during a 90-day pause, triggering a rush of investor cash into risk assets and hitting safe havens like bonds.

The yield on the benchmark US 10-year Treasury note rose 8.6 basis points to 4.461%, amid a strong rally that pushed stocks and the dollar higher.

The world’s two largest economies said in a joint statement that they had reached a deal to impose a 90-day pause on tariffs and reciprocal duties would drop sharply, giving investors some confidence that a full-scale trade war may have been averted.

US Treasury Secretary Scott Bessent, speaking after talks with Chinese officials in Geneva, told reporters the two sides had reached the deal that was outlined in a joint statement and that reciprocal rates would drop by 115 percentage points.

President Donald Trump said on Monday that the deal includes larger acquisitions of US agricultural products by China and other market access issues.

“Yields are rising because of investors’ risk-on movement, reversing what had been happening since Liberation Day,” said Tom di Galoma, managing director at Seaport Global Holdings.

The 10-year yield is still well above where it was prior to Trump’s April 2 “Liberation Day,” when he unveiled a flurry of tariffs on US trading partners. At that point, 10-year yields were at 4.15%.

Adam Hetts, Global Head of Multi-Asset and Portfolio Manager at Janus Henderson, said investors are cautiously optimistic, adding risk but in a measured way.

Now markets will try to estimate the damage to economic growth created by the volatility. “So far, we have seen some damage to the soft data, consumer sentiment, but not sharp changes in hard data. We are going to understand the impact on the economy over the next months.” Hetts said.

On Tuesday, the April Consumer Price Index will show if “Liberation Day” had any immediate impact on inflation, but it will take more data releases to have a clearer picture. Yesterday, markets were pricing the first potential interest rate by the Fed in September, and up to two rate cuts through the end of the year, according to CME’s FedWatch tool.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 11.3 basis points to 3.996%. Other investor safe havens such as the Swiss franc fell.

A closely watched part of the Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 46.3 basis points, flattening from 48.7 basis points late Friday.

(Reporting by Tatiana Bautzer, additional reporting by Amanda Cooper and Medha Singh; Editing by Kirsten Donovan, Andrea Ricci, and Nick Zieminski)