Fiscal Fears Fade, but Market Volatility Lingers

Trump Ducked a Disaster from the Bond Market, But the Damage Isn't Over Yet

By Jeff Cox | CNBC • 4:30 PM ET, 04/10/2025

A bond market disaster was averted when the Treasury Department intervened to calm the markets, but the damage is far from over, experts warn.

Last week, the yield on the 10-year Treasury note skyrocketed to a record high of 3.45%, sparking a crisis in the bond market. The sudden surge in yields was triggered by a combination of factors, including inflation concerns and the Federal Reserve's tightening monetary policy.

The crisis was so severe that it prompted the Treasury Department to intervene, buying up bonds to stabilize the market. The move helped to bring yields back down, but the damage has already been done, experts say.

"This was a close call, and it's a reminder that the bond market is a fragile beast that can be easily spooked," said Jim Bianco, president of Bianco Research. "The damage may not be apparent yet, but it's there, and it's going to take some time to work its way out."

The bond market crisis has significant implications for the economy and investors. Higher yields can make it more expensive for companies and governments to borrow money, which can slow economic growth. It can also make it more difficult for investors to generate returns, as bond prices tend to fall when yields rise.

The crisis also highlights the fragility of the global financial system, which is heavily dependent on the bond market. The bond market is the largest and most liquid market in the world, with a total value of over $100 trillion.

"This is a wake-up call for investors and policymakers," said David Kelly, chief global strategist at JPMorgan Funds. "The bond market is not just a source of funding for governments and companies, it's also a source of stability for the entire financial system. If the bond market is not functioning properly, it can have far-reaching consequences."

The Treasury Department's intervention has helped to stabilize the bond market, but experts warn that the crisis is far from over. The Department of the Treasury has a history of intervening in the bond market to stabilize prices and maintain market functioning.

"This is a classic case of the Treasury Department intervening to stabilize the market," said Bianco. "It's not the first time they've done it, and it won't be the last. The bond market is a sensitive beast, and it requires careful management to keep it functioning properly."

In the meantime, investors are left to navigate the aftermath of the bond market crisis. The crisis has significant implications for investors, who are left to wonder what the future holds for the bond market.

"This is a time of great uncertainty for investors," said Kelly. "The bond market is a critical component of the financial system, and its stability is essential for the overall health of the economy. Investors need to be prepared for a period of volatility and uncertainty, and they need to be prepared to adapt to changing market conditions."