It’s a well-accepted near-truism for the Donald Trump administration (we can only hope to get near the truth) that the US President keeps an eye on the US 10Y bond yield after declaring various economic and/or military attack plans.
Listen to the HotCopper podcast for in-depth discussions and insights on all the biggest headlines from throughout the week. On Spotify, Apple, and more.
When the US 10Y bond yield climbs past 4.5%, that’s generally when Trump will start to wind back his various posturings, if they’re rankling a lot of allies and economic behaviours.
We saw it with tariffs almost immediately after April 2 in 2025, and we’ve seen it again this month. In the last few days, the US 10Y bond yield got dangerously close to 4.7% – at that level, the world would find it hard to believe the US government could, on paper, pay back its already staggering debt.
Less than 72 hours later, we now have no-this-time-it’s-serious announcements from Washington that the US might be prepared to wind down its war with Iran. Perhaps reports that the US has lost 20% of its pre-war drone fleet in Iran are also factoring into considerations.
At any rate, the market has liked the news. Brent Crude prices fell below uS$110/bbl and the price of gold went back up. That latter signal is being considered a positive, even though not that long ago, higher gold prices were a signal of heightened geopolitical risk and didn’t necessarily spell good news for stock markets.
But that was then and this is now. So why does a 10Y US bond yield of 4.7% matter so much?
A 4.7% yield on the US 10Y bond yield can generally be seen as a lack of global confidence in the ongoing stability of the United States’ economy, because when government bond yields go up, that’s because people are selling them off. High yields, unlike high stock prices, are meant to attract buyers to buy the bonds.
High yields are a bad thing in this context, that’s what matters. It’s apparently Trump’s way of figuring out how far to push the envelope.
It’s a theory that conforms to the behaviour we’ve seen from the US President over the 2.0 Administration, and when it comes to fresh hopes of peace in Iran – assuming that can be achieved right now – it’s a theory that’s proven true, once again.
That interests me a lot more than what happened on the ASX this week. But with the announcements of peace plans, we jumped higher on Friday, and as the market had three out of five green days this week, that’s not too bad. But I’m going to leave it here, because by Monday, we could be back to war with Iran.
As I’ve said before: Trump does his best work on weekends.
Join the discussion: See what’s trending right now on HotCopper, Australia’s largest stock forum, and be part of the conversations that move the markets.
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.