From "Never Blink" to "Lightning Compromise": Did Trump Surrender to the Bond Market?

When the Nasdaq fell 10% and 20% from its highs, Trump, who maintained a stance of aggressive tariff policies, seemed to "not even blink." However, after US bonds faced intense selling this week, Trump "lightning-fast" suspended the "reciprocal tariffs" on most countries before the sun set on April 9, the "Reciprocal Tariff Day"...

This inevitably made many industry insiders curious: Was the US government's tariff suspension largely to "save US bonds"?

It is reported that US President Trump said on social media on the 9th local time, "Given that more than 75 countries have called US representative agencies to negotiate solutions on issues related to trade, trade barriers, tariffs, currency manipulation, and non-monetary tariffs, I have approved a 90-day suspension for these countries, which applies to reciprocal tariffs. During this period, general tariffs will be reduced to 10%, and the suspension takes effect immediately."

After Trump's major shift in tariff policy, the S&P 500 index recorded its largest gain since 2008 overnight, and the Nasdaq surged more than 12% in a single day.

At the same time, US bond prices generally halted their decline during the Asian session on Wednesday. The yield on the 10-year US Treasury narrowed its gain to 12.6 basis points, closing at 4.386%. Earlier, it had reached 4.515%, the highest since February 20. The yield on the 30-year US Treasury also narrowed its gain to 6.1 basis points, closing at 4.776%, after hitting a high of 5.023% during the day, the highest since November 2023.

As previously reported by Caixin, the epic sell-off in the US bond market reached an extremely dangerous moment during the Asian session on Wednesday. The yield on the 30-year US Treasury rose 56 basis points in less than three trading sessions—the last time yields rose this much in three days was on January 7, 1982. Nomura interest rate trader Ryan Plantz even warned in an internal memo, "In the Treasury space, swap spreads and basis trades are melting. The US Treasury market is experiencing unprecedented large-scale unwinding, and a liquidity vacuum has formed."

Famous economist Peter Schiff even claimed that if the US Fed did not take emergency "rate cuts + QE" on Wednesday, a stock market crash similar to the "Black Monday" of 1987 could recur.

However, in the end, although people did not get the "Powell put" on Wednesday, they unexpectedly received a "Trump put"—the "King of Understanding" finally made concessions on reciprocal tariffs...

Trump and Besant faced a "soul-searching question"

So, did the US government really suspend tariffs to "save US bonds"?

Interestingly, both Trump and US Treasury Secretary Besant were asked about this topic last night...

On Trump's side, when a reporter asked, "Did the bond market convince you to make the (tariff) reversal?" Trump said, "The bond market is very tricky, I've been watching it. But if you look at it now, it's beautiful. I felt a bit sick last night. You have to be flexible to get things done."

Clearly, Trump seemed to tacitly acknowledge that US bond volatility had become one of the factors in his decision-making changes.

However, US Treasury Secretary Besant denied any connection between US bond volatility and the tariff suspension last night. Besant was also asked at the White House—did the shocking rise in US bond yields, which raised concerns about a liquidity crisis and questions about whether US Treasuries were losing their safe-haven status, prompt Trump to make some concessions?

Besant pointed out, "This was driven by the president's strategy. He and I had a long talk on Sunday, this has always been his strategy."

Earlier in the day, Besant also downplayed the potential impact of US bond turmoil. He said that the current turmoil in the US bond market is not systemic and expects the bond market to stabilize. "I don't think this is a systemic issue, I think the deleveraging happening in the bond market is a disturbing but normal process."

What does Wall Street think?

It is worth noting that some Wall Street figures do not agree with Besant's seemingly evasive statements.

Allianz Group's chief economic advisor Mohamed El-Erian said on Wednesday, "Just an hour ago, people were debating what could convince the US government to choose some form of tariff suspension. Was it Congress, the president's advisors, business leaders, the judiciary, the market, or something else?"

"We got the answer today: it was the government bond market—especially how close it came to the line between extreme price volatility and market failure." Former JPMorgan chief global strategist Marko Kolanovic also said, "The bond market collapse likely put the White House in a difficult position."

"After the bond market collapsed, their entire narrative fell apart, their first excuse was, 'Well, this (tariff suspension) works for the bond market,' it was probably the bond market that forced them to do it." KLARITY FX managing director Amarjit Sahota pointed out, "Why today? I think almost everyone was discussing this morning what was going on with the US 10-year Treasury yield?"

"Why did yields rise sharply? People were selling bonds, who exactly was selling these bonds? There was speculation about hedge fund sellers and foreign investors." "This might have been enough to scare the government into providing a tariff suspension." In addition, F/M Investment Company's chief investment officer Alex Morris also believes that it was the bond market that prompted the president to take action—it had already started signaling that the situation would continue to deteriorate. Market volatility was definitely a heavy blow... Stock trading is influenced by tweets, market sentiment, and concerns about foolish policies being introduced. But currently, liquidity is still sufficient, and the market structure remains sound. In fact, since officially taking office at the beginning of this year, the US Treasury under Besant's leadership has always placed far more importance on US bond volatility than on US stocks. As early as early February, when his nomination was just approved, Besant said that the Trump administration was more focused on the 10-year US Treasury yield than the US Fed's short-term benchmark rate in reducing borrowing costs.

Whether it is the policy measures already implemented by the Trump administration, or many plans still under discussion or in the works, such as tariffs, DOGE, Bitcoin reserves, checking the treasury, immigration gold cards, the US sovereign wealth fund, the Mar-a-Lago agreement, etc.,

the ultimate goal seems to revolve around two words: "debt reduction"!