Investor nerves were rattled after a weak $58B 3-year Treasury auction revealed soft demand and low foreign participation, raising red flags ahead of this week’s $39B 10-year and $22B 30-year auctions. The 10-year yield has surged from 4.20% to 4.43% in just five days, approaching the psychologically critical 4.50% threshold — a level that could trigger broader repricing across risk assets. With CPI data and earnings season kicking off next week, the bond market faces a pivotal test. Long-duration bonds are increasingly vulnerable to inflation surprises, Fed recalibration, and capital flow shifts, making the upcoming auctions a litmus test for investor confidence in fiscal discipline and inflation control.

Investors are paid a premium over comparable Treasurys for taking such risks in corporate bonds. While those spreads are now historically tight, raising valuation concerns, they also suggest junk-bond investors aren’t expecting a recession, despite President Donald Trump’s tariffs. 

President Trump has locked on August 1 as the hard deadline for a sweeping tariff regime, with reciprocal levies of 25–70% targeting over 100 countries. The surprise 50% copper tariff — imposed under Section 232 — triggered a record spike in US futures and a 25% premium over LME prices. Pharma and semiconductor imports are next in line, with threats of up to 200% tariffs and a 12–18-month window for supply chain relocation. Trump’s use of unilateral letters as “deals” has injected legal and diplomatic uncertainty, while the compressed timeline raises the risk of retaliation from major economies. The strategy is clear: extract last-minute concessions through pressure, but the execution risks disrupting global supply chains, fueling inflation, business decision making paralysis and fracturing trade norms.

TACO COMPLACENCY: Markets appear increasingly desensitized to Trump’s tariff threats, with the “TACO” (Trump Always Chickens Out) mindset dominating. This complacency is reflected in the S&P 500’s ~6% YTD gain. However,  if Trump’s August 1 deadline turns out to be firmer than past episodes, and if tariffs begin to materially impact margins or consumer prices, sentiment could reverse sharply.

“CRWV is playing the long game. They just bought the power grid for AI compute, but they’ll trade like a data center stock until Wall Street figures it out. If you can stomach the next few quarters of chop, this might be the most asymmetric AI power trade on the board.”

Copper has long been seen as a key weather vane for economic growth, with higher prices often signaling industrial expansion. But analysts now fear that tariff-induced price hikes on metals and other imported goods could prop up U.S. inflation, which has remained stubbornly elevated above the Federal Reserve’s 2% target. 

Higher costs could hit the profit margins of U.S. companies that need copper to build infrastructure or manufacture other products. At the same time, jumping commodity prices are a boon to domestic mining firms such as Freeport-McMoRan. Shares in the firm have catapulted 22% higher this year.