Markets were rocked this week by mounting tensions in the U.S. Treasury market after Moody’s downgraded the nation’s credit rating, stripping it of its top-tier status.
Investor sentiment weakened further midweek when a 20-year Treasury auction revealed soft demand, fueling concerns about future government borrowing needs.
This sparked a sell-off in long-term bonds, sending the 30-year Treasury yield as high as 5.15%, before easing back toward 5% by Friday.
Adding to fiscal concerns, President Donald Trump, alongside Defense Secretary Pete Hegseth, announced a $175 billion initiative dubbed the “Golden Dome,” a multi-layered missile defense project intended to shield the U.S. from foreign military threats, including hypersonic and ballistic missiles.
On the political front, the House of Representatives passed what Trump called the “One, Big, Beautiful Bill” — a sweeping tax and spending package. According to the Congressional Budget Office, the bill could increase the federal budget deficit by $3 trillion to $4 trillion over the next decade.
Trade tensions flared anew on Friday. Trump took to Truth Social to threaten Apple Inc. AAPL with 25% tariffs if it doesn’t move production back to the U.S.
Later, he announced 50% tariffs on goods from the European Union, effective June 1, as talks between Washington and Brussels cooled.
The move marks the sharpest escalation in transatlantic trade relations in years. In 2024, U.S. imports from the EU reached $687 billion, with a record goods trade deficit of $236 billion. In March 2025 alone, the U.S. imported $91.9 billion from the bloc, racking up a $47 billion monthly deficit, as firms accelerated shipments ahead of the tariffs.
On the economic front, May’s Purchasing Managers’ Index surveys delivered a mixed signal. Activity in both services and manufacturing sectors grew faster than expected, indicating underlying strength. However, the data also showed the sharpest rise in input prices in nearly three years, stoking inflationary fears.
With stocks, the U.S. dollar and Treasuries all losing ground this week, investors sought protection against government instability and risks of currency debasement.
Gold prices — as tracked by the SPDR Gold Trust GLD — jumped more than 4% over the week, recovering all of last week’s losses and inching back toward record territory. Meanwhile, Bitcoin BTC/USD exploded past the $111,000 mark for the first time in history.
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Photo: Miha Creative via Shutterstock
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