The bond market called Trump's bluff but the coast remains hazy

A spike in bold yields made the US pause its harsh tariffs but we've had no relief from uncertainty

- VIVEK KAUL

A line often mis-attributed to Vladimir Lenin goes: "There are decades where nothing happens, and there are weeks where decades happen." Last week was one such momentous one as the 'tariff tantrums' of US President Donald Trump first created chaos and uncertainty and were then paused. A 90-day suspension of country-specific reciprocal tariffs was announced on 9 April, excluding those on China. Was this a Trump victory or a case of his winging it until things got difficult?

Before 9 April, the Trump administration claimed that it wasn't bothered about stock prices falling, with Trump even posting a video saying that he was crashing the market "on purpose."

What was the purpose? Tariffs would lead investors to sell stocks. This money would be invested in Treasury bonds. With demand for bonds going up, their prices would rise and yields would fall, as they're inversely proportional. A yield is the annual return that can be earned if investors buy a bond and hold it till maturity. Once yields fell, interest rates would fall in tandem and the government could then issue new bonds to replace maturing ones at lower rates.

On 20 January, the day Trump was sworn in, the 10-year bond yield was 4.62%. On 4 April, it was 3.99%. Then things turned. On 9 April, the yield briefly even crossed 4.5%.