Liberation Day Volatility Has Come and Gone

The past 2 days of selling in the bond market may seem dramatic, but they make solid sense in the bigger picture. Trump's April 2nd "Liberation Day" was a hotly anticipated flashpoint for financial markets. Along with last week's economic data, it led bonds to rapidly begin pricing in more negative economic scenarios. We were already seeing the initial reaction fade on Friday, but this week's headlines have basically taken us right back to where we started last week.  The latest installment came early this morning with Bessent referring to tariffs as a "melting ice cube." Long story short, there is still plenty of fear/uncertainty about how things will all shake out, but the past two days have shown bond traders that the administration is not simply going to tariff the global economy into oblivion--a concept that had contributed to 10yr yields breaking below 4% last week.