Recent trade tensions under the Trump administration have reignited inflation concerns, leading to a flattening of the Treasury yield curve. The resurgence of tariff risks has prompted a rise in short-dated bond yields, contrasting with the 2018-19 trade war period when recession fears drove yields lower. In the current post-pandemic environment, markets view tariffs as inflationary, with businesses potentially using them as a pretext for price hikes, thereby amplifying inflation expectations. This shift in perception has resulted in increased short-term rates relative to long-term rates, signaling potential market concerns about slower long-term economic growth.
The 10-year Treasury yield, represented by the TNX, is currently at 4.42 as of 11:32 on February 5, down from its last close of 4.51. The yield opened at 4.46 and reached an intraday high of 4.47, reflecting the ongoing market adjustments to the evolving trade and inflation landscape.