Are U.S. Treasury Yields Signaling a Market Rebound?

U.S. Treasury yields climbed at the close of Monday’s trading, propelled by positive economic developments and shifting trade dynamics that bolstered investor risk appetite. This surge in optimism triggered heavy selling of U.S. Treasuries, which maintain an inverse relationship with their yields, as market participants leaned into riskier assets. The uptick reflects a broader market response to encouraging U.S. economic data and evolving trade policy expectations.

The U.S. Manufacturing PMI rose to 49.8 in March, a notable improvement despite falling short of market forecasts and declining 2.9 points from the prior reading. More significantly, the U.S. Services PMI surged to 54.3, adding 3.3 points and exceeding expectations of a more modest 51.0. This robust services sector performance signaled economic resilience, fueling investor confidence and contributing to the rise in Treasury yields as markets recalibrated their outlook.

Trade policy developments also played a pivotal role. Reports indicate the White House plans to narrow its approach to tariffs set to take effect on April 2, potentially scrapping duties on certain sectors while imposing targeted reciprocal tariffs on key trading partners. These partners, representing a significant share of U.S. foreign trade, have imposed tariffs on American imports, prompting a response. President Donald Trump hailed the upcoming tariffs as a “day of liberation” for the U.S., aiming to level the playing field with nations imposing duties on U.S. goods.

The yield on 10-year U.S. Treasury notes rose to 4.346% from the previous day’s close of 4.275%. During Monday’s session, yields dipped to a low of 4.295% but remained near the session’s high of 4.349%. This upward movement underscores a market increasingly optimistic about economic prospects, though tempered by the complexities of looming trade policies. As investors navigate these dynamics, the rise in yields signals a cautious but growing confidence in the U.S. economy’s trajectory.