Background on Key Figures and Context
The United States, the world’s largest economy, and China, the second-largest, have agreed to a 90-day truce on tariffs, causing US Treasury yields to rise. This development has impacted safe-haven assets like bonds.
Key figures in this story include:
- Scott Bessent: The US Treasury Secretary who confirmed the agreement following talks with Chinese officials in Genebra.
- Donald Trump: The President of the United States, who announced increased Chinese purchases of US agricultural products as part of the deal.
- Tom di Galoma: Director of Seaport Global Holdings, who commented on the market’s positive reaction to avoiding a full-scale trade war between China and the US.
Details of the Agreement
According to a joint statement, the US and China agreed on a 90-day tariff truce. During this period, mutual tariffs will be significantly reduced. This news bolstered investor confidence that a large-scale trade war could potentially be averted.
Under the agreement, reciprocal tariffs will drop by 115 percentage points. Additionally, China has committed to increasing its purchases of US agricultural products.
Impact on US Treasury Yields
Following the announcement, the yield on the benchmark 10-year US Treasury note rose by 8.6 basis points to 4.461%. This increase was part of a broader market rally that pushed stocks and the US dollar higher.
The 10-year Treasury yield is now significantly higher than it was before President Trump’s “National Day of Liberation” on April 2, when he unveiled a series of tariffs against US trading partners. At that time, the 10-year yield stood at 4.15%.
The 2-year Treasury yield, which often moves in anticipation of interest rate expectations, increased by 11.3 basis points to 3.996%. A closely watched portion of the yield curve measuring the difference between 2-year and 10-year bond yields, viewed as an economic indicator, was at 46.3 basis points, down from 48.7 basis points on Friday.
Key Questions and Answers
- Q: What is the agreement between the US and China? A: The United States and China have agreed to a 90-day tariff truce, during which mutual tariffs will be significantly reduced. China has also committed to increasing its purchases of US agricultural products.
- Q: Who are the key figures involved in this agreement? A: Key figures include US Treasury Secretary Scott Bessent, President Donald Trump, and Tom di Galoma from Seaport Global Holdings.
- Q: How have US Treasury yields reacted to this news? A: Following the announcement, US Treasury yields have risen. The 10-year yield increased to 4.461%, while the 2-year yield rose to 3.996%. The yield curve’s shape has also shifted, with the spread between 2-year and 10-year yields narrowing.
