By Joy Wiltermuth
U.S. government bonds sold off in tandem with stocks on Monday after President Donald Trump threatened to apply higher tariffs against a group of trading partners in less than a month.
Trump said Monday that goods from Japan and South Korea would be hit with 25% tariffs on Aug. 1, while the rate on imports from Myanmar and Laos will rise to 40%. That’s up from a 10% baseline tariff since April.
Stocks recently touched record highs after an ugly selloff sparked by Trump’s “liberation day” tariffs, which were paused three months ago but now are back on the table.
“It seems like every time the equity market loses steam, there’s a tendency for bond yields to rise,” said Tom di Galoma, a managing director at Mischler Financial Group, in a phone interview. “The old relationship, the flight to quality, just isn’t there anymore.”
The Dow Jones Industrial Average DJIA fell 0.9% to 44,345, logging its worst daily decline in roughly three weeks, according to Dow Jones Market Data. The S&P 500 index SPX shed 0.8% and the Nasdaq Composite Index COMP fell 0.9%.
Treasurys sold off too, sending the 10-year yieldBX:TMUBMUSD10Y up 5.5 basis points to 4.394% and the 30-year yield BX:TMUBMUSD30Y 7.2 basis points higher to 4.929%. Bond yields and price move in the opposite direction.
Yet all three stock indexes were less than 1.5% off their record levels, while bond yields have yet to ease back to their April lows as investors have been demanding higher yields to offset concerns about tariffs, inflation and U.S. debt and deficit levels.
Specifically, longer-duration Treasury yields climbed for a fourth straight trading session on Monday, with the 30-year rate edging closer to its recent 5.089% peak on May 21.
Foreign investors remain a crucial part of the Treasury market. They held a record $9 trillion of Treasury debt, or 32% of the total, in the first quarter, according to Oxford Economics, using data from the Financial Accounts of the U.S. The eurozone was the biggest single group of owners among foreigners, followed by Japan, China and the U.K.
“Treasury yields today are selling off, as market participants continue to digest the stronger labor market report last Thursday,” said John Madziyire, head of U.S. Treasurys and TIPS at Vanguard, pointing to the monthly jobs report, which reflected more jobs being created than anticipated in June, but also that jobs aren’t easy to get.
See: The June jobs report is grimy under the hood. Here’s a few key numbers that tell us why.
Madziyire also said significant Treasury supply was poised to hit the market in the coming days, with the Treasury gearing up to issue $58 billion of 3-year paper on Tuesday, $39 billion of 10-year notes on Wednesday and $22 billion of 30-year bonds on Thursday.
Demand for longer-duration Treasurys has improved at recent auctions since peak “sell America” fears were gripping markets in April, he said.
Still, Madziyire said long-end Treasury auctions were again “critically important, not just as funding mechanisms but as sentiment barometers for the markets” in the wake of the Republican tax-and-spending bill becoming law.
The GOP bill makes corporate tax cuts permanent, temporarily reduces taxes on tips for some workers and cuts social programs like Medicaid, while increasing the U.S. debt ceiling by $5 trillion and adding an estimated $3.4 trillion to the deficit over the next decade.
Read: Here’s when no taxes on overtime and tips, and other parts of Trump’s big bill, will kick in.
Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, said that after April’s shock, investors still were paying attention to new Trump tariff announcements, but also viewing them as part of ongoing negotiations.
“It’s all up in the air,” Pavlik said. “What I’m not doing is making dramatic changes to my portfolio because of this.”
-Joy Wiltermuth
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07-08-25 0700ET
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