U.S. Treasury yields might rise on Trump tax bill

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U.S. Treasury yields might rise on Trump tax bill

Congressional lawmakers at a mark up meeting with the House Budget Committee on Capitol Hill on May 16, 2025 in Washington, DC, U.S.

Anna Moneymaker | Getty Images News | Getty Images

U.S President Donald Trump’s “big, beautiful” tax bill was passed by the House of Representatives Thursday and is headed to the Senate for approval.

If the bill clears that hurdle and becomes law, it “reduces taxes for lots of people, it increases spending, especially on defense,” said Jed Ellerbroek, portfolio manager at Argent Capital Management, in an interview with CNBC. Simply put, it will boost the economy in the short term, Ellerbroek added.

Further into the future, however, the bill will likely saddle America with a higher fiscal deficit. Tax cuts mean lower revenue, while

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means more money flows out of government coffers. It’s a matter of simple arithmetic: less income and more expenses.

Even though yields on U.S. Treasurys, which are essentially government debt, have moderated slightly from their Wednesday spike, they’re still at elevated levels compared with earlier in the year. This suggests investors are not as certain about lending money to the White House, and hence are demanding more safety in the form of higher yields.

Over in the stock market, investors are taking a wait-and-see approach, with both the S&P 500 and Dow Jones Industrial Average remaining mostly unchanged after Trump’s bill was passed.

There’s at least one piece of good news from Thursday. The U.S. Supreme Court strongly suggested that Federal Reserve members might have protections from being dismissed by a president, lowering the risk of another Trump administration-induced market meltdown.

What you need to know today

U.S. stocks mostly unchangedOn Thursday, the S&P 500 and Dow Jones Industrial Average closed mostly flat, while the Nasdaq Composite added 0.28%, as the U.S. House of Representatives passed Trump’s tax bill. Asia-Pacific markets mostly rose Friday. Japan’s Nikkei 225 added 0.6% as at 2 p.m. Singapore time amid news that the country’s

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— which excludes fresh food prices — heated up more than expected to 3.5% in April, the highest level since January 2023.

Treasury yields eased slightlyOvernight stateside, the 30-year U.S. Treasury yield dipped to 5.044% after touching 5.161% — the highest since October 2023 — and the 10-year yield fell to 4.535%, dropping nearly 10 basis points from earlier in the day. The sell-off in Treasurys is prompting some market watchers to rethink the status of American government bonds as a safe haven and rotate their money to other global assets.

Fed members might have protection from dismissalThe U.S. Supreme Court on Thursday strongly suggested that Federal Reserve board members would have special protection against being fired by a president. “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the majority ruling said in a court case on Trump’s firing of federal agency members.

China and U.S. hold first call since Geneva

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and China have agreed to maintain communication following a call between ******** Vice Foreign Minister Ma Zhaoxu and U.S. Deputy Secretary of State Christopher Landau, according to a 

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 released by the ******** Foreign Ministry on Friday. While the call may not indicate a breakthrough in trade talks, it is a “positive sign” that Beijing now knows who to talk to on the U.S. side, said Dan Wang, China director at political risk consultancy Eurasia Group.

Anthropic launches new AI modelsAnthropic, the 

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-backed OpenAI rival, on Thursday launched Claude 4, its latest artificial intelligence models. The company said in a release that the two models, called Claude Opus 4 and Claude Sonnet 4, are defining a “new standard” when it comes to AI agents. Claude Opus 4 is the “best coding model in the world” and can autonomously work for nearly a full seven-hour corporate workday, according to Anthropic.

[PRO] A warning sign from the equity marketMarkets stabilized Thursday after the dual sell-off in stocks and bonds, but a key corner of the equity market is blinking a caution light on the economy, wrote CNBC PRO’s Jesse Pound. While it doesn’t show that a recession is imminent, it’s a reminder that the path forward is still rocky.

And finally…

Workers assemble electronic devices in China in 2016.

Bloomberg | Bloomberg | Getty Images

Why Make-in-India isn’t a guaranteed success despite U.S. tariffs on China

While India has certainly emerged as a significant, albeit nascent, hub for electronics assembly, the path to it becoming a clear-cut alternative to China isn’t a guaranteed outcome, despite U.S. tariffs on ******** goods.

“Supply chain and manufacturing, these things take a long time to establish,” said Nick McConway, head of Asia ex-Japan equity at Amundi Asset Management. “We saw that with Vietnam, who had to put huge investment into infrastructure.”

“I think India is only at the very early stage of developing these types of globally facing manufacturing capacities,” McConway added.

The fund manager also highlighted that while labor costs can be low in India, it doesn’t mean savings for companies moving their manufacturing base to India.

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