Treasury Secretary Scott Bessent is on record saying he is focused squarely on getting the 10-year yield down, leading investors to surmise that lower borrowing costs are more important to the administration than higher equity prices. This is a major departure from Trump's first term, when he regularly celebrated stock market gains in social media posts.

To that end, the 10-year yield's slump in the two days after Trump's tariff reveal on April 2 fit the script, though Bessent and Trump would probably have preferred a driving force other than exploding recession fears.

In theory, lower borrowing costs will cushion the blow that a tariff-weakened economy could inflict on businesses and households. And crucially, they will also ease the federal government's huge debt-servicing burden. Cutting interest rates, as Trump recently implored Federal Reserve Chair Jerome Powell to do, would be an added benefit for everyone.

But it's not working out that way. Trillions of dollars have been wiped from U.S. stock markets in recent days and interest rate cut expectations have ramped up aggressively, yet the 10-year yield is now above the 4.10-4.20% range it was in on 'Liberation Day'.

Zoom out further, it's notable that even though the benchmark yield has declined 60 basis points since January, it is still 60 bps above its September low. Or, looked at another way, although the S&P 500 has fallen 17% in the last five months, losing around $9 trillion in market cap, the 10-year yield is essentially unchanged.

You can always pick and choose your timeframe to suit a narrative, but it is clear that yields are not falling as much as Bessent and Trump would like, or as most observers would expect in such a febrile 'risk off' environment.

Treasuries are simply not attracting the 'flight to safety' demand from global investors, as they have in almost every period of stock market turbulence in recent decades.

NEGATIVE TRENDS

What gives? For one, tariffs are typically considered inflationary, at least initially, and inflation forecasts are being ramped up across the board, including at the Fed itself. With inflation still above the Fed's 2% goal and expectations not fully anchored, Powell made it clear on Friday that cutting rates is not the slam dunk it might have been in past crises.

Economists at JPMorgan noted that Powell's speech was his most hawkish in some time, while economists at Morgan Stanley changed their Fed forecast and now see no rate cuts at all this year.

Then there's the politics. The widespread derision of the formula used to calculate Trump's 'reciprocal' tariffs and concern about the administration's other controversial policies are shaking overseas investors' faith in the U.S.

"Negative trends in U.S. governance and institutions are eroding the appeal of U.S. assets for foreign investors," wrote Goldman Sachs analysts on Monday. "It is now clear that foreign officials have taken a number of actions to attempt to reduce their reliance on the dollar."

And there is also plenty of Wall Street chatter about whether some central banks may seek to reduce their U.S. bond holdings strategically as a weapon in the global trade war. The focus of this speculation is squarely on China, America's main economic and geopolitical rival, which boasts the biggest bilateral trade surplus with the U.S. and holds large quantities of Treasuries that could be sold.

Sticky yields, never mind rising yields, hugely complicate Bessent's aim of reining in the near-$1 trillion of net interest payments on U.S. public debt in fiscal year 2024. The Congressional Budget Office expects that figure to almost double to $1.8 trillion by 2035.

Bessent and Trump clearly hope that tariffs will eventually narrow the trade deficit, heralding looser monetary policy and lower yields. But with inflation fears, unprecedented uncertainty and toxic politics thick in the mix, 'eventually' seems a long way off.

(The opinions expressed here are those of the author, a columnist for Reuters.)