Treasury 5-year yield falls below 3.68% to lowest since April

Treasury 5-year yield falls below 3.68% to lowest since April

The U.S. Treasury 5-year yield dropped below 3.68% on Wednesday, marking its lowest level since April, as investors sought safer assets amid escalating geopolitical tensions and economic uncertainty [1].

The decline in the 5-year yield comes amid a broader sell-off in global bond markets. China’s 10-year government bond yield also extended its fall, hitting a one-week low of around 1.76%, driven by investors seeking refuge in safer assets [2]. This trend reflects a global shift towards risk aversion, as geopolitical tensions, such as those between the U.S. and China, intensify.

Domestic economic indicators have also influenced market sentiment. A private survey showed that China’s Composite PMI jumped to a nine-month high of 51.9 in August 2025, primarily driven by improvements in manufacturing and services sectors [3]. However, this positive economic data did not significantly alter the overall risk-averse sentiment in global financial markets.

Meanwhile, Deutsche Bank CEO Christian Sewing expects bond yields to remain elevated due to political uncertainty, lack of reforms, and rising global indebtedness [4]. He believes that the recent selloff is not merely a temporary "flare-up" but rather a reflection of deeper structural issues. Sewing attributes the changed risk sensitivity to discussions about central bank independence, which he noted do not provide much reassurance to the capital markets.

The U.S. Treasury 10-year yield also saw a significant jump on Tuesday, rising 5 basis points to 4.281%, as a court decision knocked down most of the Trump administration's tariffs raised the prospect of the government having to repay the money already brought in, stretching an already-stressed U.S. fiscal situation [5]. The 30-year bond yield climbed more than 5 basis points to 4.977%, further indicating market concerns over fiscal stability and the potential for higher interest rates.

Investors will continue to monitor key economic data, such as the nonfarm payrolls report and unemployment rate for August, set to be released on Friday. These indicators will influence the Federal Reserve's interest rate decision later this month.

References:
[1] https://www.tradingview.com/news/te_news:482389:0-china-s-10-year-yield-extends-fall-to-1-week-low/
[2] https://www.ainvest.com/news/deutsche-bank-ceo-christian-sewing-warns-elevated-bond-yields-persist-political-uncertainty-2509/
[3] https://www.cnbc.com/2025/09/02/us-treasury-yields-investors-look-to-key-jobs-report.html
[4] https://www.bloomberg.com/news/articles/2025-09-03/deutsche-bank-s-sewing-says-bond-selloff-isn-t-just-flare-up
[5] https://www.reuters.com/markets/asia/japans-budget-demands-hit-record-831-billion-political-uncertainty-increases-2025-09-03/