JAKARTA – US President Donald Trump has delayed the implementation of tariffs on around 60 countries, excluding China, for 90 days, a move believed to be prompted by the ongoing chaos in the bond market.

While Trump appeared willing to let equity markets plunge after announcing sweeping “reciprocal” tariffs against both US allies and adversaries last week — including levies targeting Antarctic islands largely inhabited by penguins — the bond market turmoil may have changed the White House’s calculus.

“The collapse in the bond market is likely what pushed the White House to pull back,” said Marko Kolanovic, former Global Head of Strategy at JPMorgan Chase & Co, as quoted by MarketWatch.

Kolanovic told MarketWatch on Tuesday night that he expected the administration to retract some of the tariffs announced the previous week.

His prediction proved accurate. On Wednesday (9 April) afternoon, Trump announced a 90-day delay on the tariffs, while raising levies on Chinese products to 125%.

“When the bond market collapses, their entire narrative collapses,” Kolanovic said in a follow-up interview on Wednesday. “The bond market may be forcing them to act.”

A surge in US government bond yields this week has sparked concerns of a looming crisis that could compel the Federal Reserve to intervene. The chaos spilling over from the US equity markets into bonds has ignited speculation over potential shocks to the global financial system.

The yield on the 10-year US Treasury (TMUBMUSD10Y) has jumped 65 basis points over the last four trading sessions, touching 4.509% on Wednesday evening as Trump’s broad-based import tariffs took effect.

Such a spike in yields hasn’t occurred since October 2008, according to Dow Jones Market Data. The 10-year yield was last at 4.50% in February. Yields move inversely to prices, rising as prices fall.

Simultaneous sell-offs in both equity and bond markets have drained liquidity. “It’s not a crisis yet,” said Robert Tipp, Chief Investment Strategist at PGIM Fixed Income, as quoted by MarketWatch, but he warned that such unstable dynamics could become “contagious” and sweep through Wall Street.

“This is like a Treasury fire sale,” said Calvin Yeoh, portfolio manager at hedge fund Blue Edge Advisors. “I haven’t seen this kind of volatility or movement since the 2020 pandemic-induced market turmoil,” he told Bloomberg.

Later this week, Kolanovic noted, companies will begin reporting their first-quarter earnings, which could be affected by the uncertainties surrounding Trump’s trade agenda — potentially fuelling further stock market volatility.

“I wouldn’t necessarily chase this rally,” he said. “I think valuations are reasonably fair right now, especially with earnings season approaching.”

However, Kolanovic is bullish on bonds. “Bonds haven’t rallied yet. They’re still down a lot,” he said.

As for whether Trump’s trade agenda is definitively resolved, Kolanovic added, “I don’t think the Europeans are suddenly going to give Trump everything he wants.”

Still, the recent drop in the Cboe Volatility Index, or VIX — known as Wall Street’s “fear gauge” — suggests markets may settle, at least temporarily. Kolanovic doubts the market will experience further dramatic swings.

VIX fell more than 32% to 35.66 on Wednesday. “I don’t think we’ll revisit all-time highs. I’d remain somewhat neutral here.”

The VIX is often referred to as the “fear index” because it rises when investor anxiety is high amid market uncertainty or downturns. A high VIX implies sharp market fluctuations (up or down), while a low VIX indicates a more stable environment. (MT/ZH)