Summary: .
Prices of U.S. government bonds posted their biggest weekly gains in more than seven months, sending their yields lower, as stock market volatility sent some equity investors into other asset classes such as fixed income. The yield of the 10-year U.S. Treasury briefly fell below the 4.00% level on Friday for the first time in about six months. As recently as mid-January, the yield was as high as 4.80% and at the end of the previous week, at 4.25%. The 2-year Treasury yield shed 5.5 basis points to trade at 3.67%.
Federal Reserve Chair Jerome Powell said on Friday that he expects Trump’s tariffs to raise inflation and curtail growth, noting that the central bank faces a “highly uncertain outlook” due to the new raft of levies announced this week. He indicated that policymakers are ready to stay on hold until they get greater clarity on the impact of the tariffs.
Exhibit 1. Australian 3Y/10Y Bond Yield
Exhibit 2. AU and US Bond Yields Spread
AU and US Bond Yields Spread
What the chart below highlights is just how much the Australian bond market is tracking and mirroring the US market. And that also means the Australian bond market has been exhibiting a high degree of volatility since the start of the year. In fact, bond volatility has been materially higher than equities volatility.
Exhibit 3. Global Bond Yields
