Longer-dated US Treasury yields fell on Friday after President Donald Trump said he may enact tariffs on smartphone giant Apple and imports from the entire European Union, raising concerns about slowing economic growth.
Trump threatened to impose a 25 percent tariff on Apple for any iPhones sold but not manufactured in the United States. More than 60 million phones are sold in the United States annually, but the country has no smartphone manufacturing.
Trump also said he would recommend a 50 percent tariff on the European Union to begin on June 1, which would result in stiff levies on luxury items, pharmaceuticals and other goods produced by European manufacturers.
“Today is probably a response to some of the threats from Trump to the EU and Apple and concerns over hurt growth,” said Mike Sanders, head of fixed income at Madison Investments.
Friday’s drop in yields comes after a choppy week that saw longer-dated yields rise on concerns about the deteriorating US fiscal outlook.
“The back end of the yield curve is really responding to the fiscal situation here in the States and that the deficit is not going to be in a better situation. We’re still probably spending too much as a country and long-term investors are getting concerned,” said Sanders.
“We could spend less, which doesn’t seem likely, or we could somewhat inflate our way out of it, and that’s bad for long-term bondholders,” he said.
