Fears regarding the economic impact of Trump’s tariffs grew during the Asian session, alongside concerns about financial stability. A report from Bloomberg raised issues about the Federal Reserve’s independence, leading to increased market anxiety.
US 10-year yields rose to 4.48%, with a weekly jump not seen since 2001, while 30-year yields climbed to 4.95%, the largest increase since 1982. The yield curve steepened to levels last recorded in February 2022, amid thin liquidity.
Foreign Exchange Movements
In foreign exchange, the USD index fell below 100 for the first time since July 2023. USD/JPY dipped under 143.00, and EUR/USD rose above 1.1350, alongside advances for CHF, GBP, AUD, NZD, and CAD.
Chinese equities ended a three-day rally as the US announced tariffs on China had reached 145%, reigniting concerns over trade. Current tariffs include 145% on China, 25% on non-USMCA trade from Canada and Mexico, 10% on a broad range of goods, and 25% on autos and steel, with a 90-day pause on further escalation of global tariffs.
In essence, the piece outlines a sharp rise in tension across financial markets. Concerns over fresh tariffs introduced by the United States, particularly those aimed at China, appear to be unsettling broader markets. At the same time, a Bloomberg report has questioned the autonomy of the Federal Reserve, prompting unease over future policymaking. Together, these developments have lifted interest rates sharply while weighing on the US dollar.
To be more precise, we’ve seen an abrupt shift in the yield curve, most clearly in the 10-year and 30-year Treasury yields, which surged to levels that haven’t been touched in decades. The 10-year jumped to 4.48%, a move of such scale that we have to go back to 2001 to find a weekly increase of similar magnitude. The 30-year reached 4.95%, which is not just high — it is the largest climb since 1982. Movements like these are rare and often signal that bond traders are re-evaluating not just near-term conditions, but long-term expectations around inflation, risk, and monetary response.
Effects On Foreign Exchange And Equities
Meanwhile, foreign exchange markets have seen the dollar come under pressure. It has dipped broadly, reflected in a drop in the USD index below the 100 threshold. Currencies such as the yen, euro, pound, franc, and several commodity-linked currencies staged gains against it. For dollar-yen specifically, breaking beneath 143.00 adds technical weight to the move — it suggests more than just noise, especially when viewed in light of widening yield differentials and possible changes in central bank positioning.
The stumble in Chinese stocks — which had been on a three-day upward run — was triggered by an American announcement confirming sweeping tariffs that top 145% in some areas. That level of imposition makes it harder to dismiss the risk of a drawn-out standoff. Goods from countries outside of the USMCA region face additional levies, affecting sectors from automotive to raw materials. While there’s a temporary 90-day hold on further tariff bumps, markets often move in anticipation, not reaction. The damage can be in confidence as much as cash flow.
What does this imply for positioning? When yields surge this aggressively, markets typically reassess duration risk. In our view, that’s already underway. The steepening of the curve — last observed in this configuration in February 2022 — adds evidence that investors are baking in either tighter funding conditions or a steeper policy path. This creates opportunities in the short-to-medium end of the curve but also introduces volatility that must be managed carefully. If the Fed’s path is seen as less predictable, pricing short-term risk becomes messier.
For foreign exchange exposures, a smaller dollar signals waning demand or reduced confidence in long-term US policy cohesion. The moves are also telling in that they occur during thin liquidity, which can amplify momentum. This makes it more important to pay attention to volume shifts and real money flows. Positioning in G10 will likely become more tactical. We’ve found such situations reward close attention to price behaviour rather than narratives.
Equities, particularly in Asia, are vulnerable to more pressure if trade friction persists. There’s little question that tariffs at the 145% level alter trade calculus meaningfully. Risk-off sentiment has become more likely, though not yet entrenched — particularly if central banks step in to calm bond markets. But that’s a large ‘if’. For options pricing, higher vol surfaces on Asian indices and select G10 FX crosses may be worth exploring. The recent environment lends itself to wider dispersion and delayed mean reversion.
We do think the trigger is as much psychological as it is mechanical. A questioning of the Fed’s independence isn’t a minor detail — it touches on the legitimacy of the institution underpinning US monetary credibility. That’s a risk premium markets will not be quick to forget.
In the days ahead, we expect spreads to matter as much as outright levels. Arbitrage is less safe when currents run deep. Tracking shifts in cross-border hedging, especially in euro-dollar and dollar-yen basis swaps, may provide early clues to next steps. As always, positioning should absorb tail risk without letting it dominate.
