US 10Y TREASURY: tariff shock sends yields lower

Treasury yields dropped further as markets reacted to the sudden escalation in U.S.–China trade tensions, after U.S. President’s announcement of a 100 % tariff on Chinese imports. The move deepened fears of economic disruption and amplified uncertainty around trade policy. This came in addition to already increased uncertainty considering that the U.S. Government is already 10 days in the state of “shutdown”. The U.S. benchmark 10Y bond yields dropped from the level of 4,15% down to 4,03%. They are ending the week at 4,05%.
The week ahead will be driven by fundamentals. It is expected that new information will be released by the US Government regarding announced trade tariffs. This will most certainly impose a higher market volatility. As per current charts there are two options for 10Y yields: on one side, some relaxation could bring yields back to levels above the 4,10%, while on the other hand, the level of 4,0% is missing testing.