Bond Yields Fall as Economic Signals Stay Strong
U.S. Treasury yields declined on Friday as investors weighed recent economic data and growing tensions over tariffs. The 10-year Treasury yield dropped 4 basis points to 4.423%, while the 2-year yield also declined over 4 basis points to 3.87%. The 30-year yield edged lower by nearly 2 basis points to 4.99%.
Other maturities followed suit. The 1-month yield fell to 4.316%, the 1-year to 4.085%, and the 6-month to 4.267%. Yields move inversely to bond prices, and even minor fluctuations often reflect broader shifts in market sentiment.
Trump’s Tariff Threats Add Pressure
Markets were on edge as new reports emerged that President Trump had escalated tariff demands in trade talks with the European Union. According to the Financial Times, Trump is now demanding a 15% to 20% blanket tariff on EU imports. The announcement fueled concern among investors, adding to uncertainty about the economic outlook and global trade relationships.
While stocks largely brushed off the news, bond markets reacted with caution. Investors typically move funds into Treasuries in times of geopolitical or economic stress, leading to lower yields across the curve.
Data Shows Resilient U.S. Economy
Despite tariff tensions, recent data continued to signal economic strength. The University of Michigan’s July consumer sentiment index rose 1.8% to 61.8, the highest since February. Notably, both short- and long-term inflation expectations fell to their lowest levels in months, signaling consumer confidence in price stability.
Additional reports pointed to a solid housing sector. June housing starts rose 4.6% from May to a seasonally adjusted annual rate of 1.32 million, beating expectations. Building permits also improved. Meanwhile, jobless claims fell and June retail sales exceeded forecasts, adding to the picture of a steady economic foundation.
Outlook for Labor and Markets Remains Stable
Fixed income strategists noted the continued resilience of the U.S. labor market. “Job growth has been respectable – albeit far from robust – despite the uncertainty caused by President Trump’s trade policy,” said Marcus Jennings of Schroders. He added that signs of stability are evident across multiple fronts and that corporate profitability remains largely unaffected.
With yields easing and economic fundamentals holding firm, investors are closely watching how further developments in trade policy could influence bond markets and risk sentiment heading into August.
