The bond market may expose the bluff of Trump's tariff policy.

In the past week, the market experienced rollercoaster fluctuations, with the most concerning factor being the 60 basis point surge in the 10-year U.S. Treasury yield.

Faced with the volatile sentiment in the bond market, U.S. President Trump made some concessions, announcing a 90-day delay in the implementation of reciprocal tariffs. On that day, the stock market surged significantly. However, the dangerous dynamics of the bond market that led to the "Trump put options" quickly resurfaced, and there have been no signs of easing since then.

This week, there are two potential policy actions that are more likely: first, Trump may tout significant progress in trade negotiations as a face-saving measure to reduce tariffs on certain countries. Second, market turmoil may force the Federal Reserve to inject liquidity.

The bond market may attempt to expose Trump's bluster in the coming week. The policy responses from the White House and the Federal Reserve will determine whether the economy is on the brink of a more dangerous situation than the normal deleveraging process.