Market Pullback: Interest Rate Jitters Replace Earlier Tariff Fears in Crypto

Markets Struggle as Interest Rate Fears Overshadow Tariff Reversal

A fresh tariff reversal from President Trump failed to ignite a sustained rally in risk assets, as traders shifted focus to surging global bond yields and rising stagflation concerns.

Midway through Thursday’s U.S. trading session, stocks and cryptocurrencies saw brief gains after Commerce Secretary Howard Lutnick announced that Mexico would be exempt from the newly proposed 25% tariff—provided existing trade agreements covered the goods or services in question. Trump later confirmed the move via social media, helping bitcoin (BTC) briefly climb above $91,000.

However, the optimism quickly faded. The Nasdaq erased early gains and slumped 2.3% to session lows, while bitcoin reversed to $88,500, down nearly 1% over the past 24 hours.

Inflation, Growth Fears Take Center Stage

Beyond the back-and-forth on tariffs, the real market-moving story may be the sharp rise in global interest rates.

European countries are ramping up defense spending in response to shifting U.S. geopolitical priorities, triggering major bond market turmoil. Germany’s 10-year Bund yield has jumped more than 40 basis points this week to 2.83%, marking one of its worst bond crashes on record. Meanwhile, Japan’s 10-year Government Bond (JGB) yield hit 1.51% overnight—more than doubling in just six months.

The U.S. is also feeling the pressure. After falling roughly 70 basis points since Trump took office, the 10-year Treasury yield has surged over 20 basis points in the past two days, now sitting at 4.30%.

“The bond market is flashing warning signs,” said Quinn Thompson of Lekker Capital. “Yields are climbing while economic growth slows, which is the classic recipe for stagflation. Historically, this environment has been a major headwind for risk assets.”

Market Braces for Key Jobs Report

The rapid rise in interest rates places added importance on Friday’s U.S. Nonfarm Payrolls report, which could determine the next major move in markets.

Analysts expect February payroll growth of 160,000, up from 143,000 in January, with the unemployment rate holding steady at 4%. Given that recent jobs reports have consistently surprised to the upside, a stronger-than-expected number could push yields even higher—potentially triggering another round of selling in equities and crypto.

With uncertainty growing, investors are watching closely to see whether markets can absorb the latest economic shocks or if more turbulence is on the horizon.