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Hey fellow investors! The US 10-year Treasury yield is my personal “fear index” for REITs. When that yield drops, it’s usually good news — a sign that the bond market expects slower growth or lower inflation, which often translates into better support for REIT prices. And of course, the reverse holds true. 

Hence I was glued to my iPad showing the trends of the 10-year Treasury yields and boy was I shocked by the volatility over the past two weeks, which sent my heart going up and down, much like a roller coaster ride!

Just two weeks ago, after a surprise global tariff announcement by the US administration, the stock market panicked. And as expected, the 10-year yield initially fell — from about 4.3% to as low as 3.8%! Investors were scrambling to buy the supposedly risk-free Treasuries. As a result, the REITs held up quite well during that time, even while global equities took a hit.

Then came the twist. Over the past week, that same 10-year yield didn’t just reverse… it surged all the way up to 4.5%. That’s a major move in just a few days — and you can probably guess what happened next. REITs plunged, right along with it.

So what on earth is going on? Why did yields spike so hard even when the US inflation data was actually coming in lower than expected?

That’s what I’ll unpack today — and I’ll also share what I think it means for REIT investors like us, and what I’m personally doing with my portfolio.

Before we dive in, just a quick heads-up — the annual REITs Symposium 2025 is happening on 24 May at Suntec Convention Centre. It’s one of the best events to hear directly from REIT managers and get fresh insights. The organisers have kindly offered complimentary passes for subscribers of this channel. I’ve placed the link in the comments section, so don’t miss out — grab your free pass while it’s still available. 

As usual, let me remind you that this post is for informational purposes only and not financial advice. Always do your own research and consult a licensed financial adviser before making any investment decisions. I own some of the REITs discussed, but what works for me might not work for you.

Alright, let’s get started!

Why This Yield Spike Matters So Much for REITs

If you’re newer to REIT investing, you might be wondering — what’s the big deal with US Treasury yields anyway? Why do REIT prices swing so wildly every time the 10-year rate moves? I’ll quickly explain in this section. If you already know the reasons, feel free to jump to the next section! 

Let me explain it this way:

Imagine REITs as rental properties that pay you steady income — and Treasuries as government-backed bonds that also give you income, but with no risk. When Treasury yields rise, investors suddenly have a safer alternative for income… and REITs look less attractive by comparison. So REIT prices fall until they offer a competitive yield again.

But there’s another layer to this — higher yields also mean higher borrowing costs for REITs. Most REITs rely on debt to fund their operations or acquisitions. So when interest rates shoot up, their refinancing gets more expensive, and distributions can take a hit.

And this isn’t theoretical — we’ve already seen what happened to REITs over the past year as yields crept up. Just when we thought things were turning around… the latest spike in the 10-year yield slammed the brakes again.

The bigger question is:

Why did this happen so suddenly — especially when inflation is coming down and recession worries are back on the table?

Let’s dive into what’s really going on behind this bond market mess.

What’s Driving the Spike in Treasury Yields?

This, I believe, is the heart of the puzzle we’re facing right now. In times of uncertainty, especially with trade tensions and market volatility, you’d expect investors to flock to safe haven assets — and US Treasuries are usually at the top of that list. When demand for Treasuries rises, their prices go up, and yields go down. Simple, right?

But that’s not what we’ve seen over the past week. Despite all the fear and chaos, yields have actually surged. Which is completely counterintuitive.

So, what’s going on?

Well, there isn’t one neat explanation. Instead, it’s a messy mix of different forces all pulling at once — and frankly, none of them are pretty. Let’s unpack the six possible drivers on what’s happening behind the scenes.

1. Inflation fears aren’t dead yet

Even though recent data showed headline inflation easing a little, the announcement of tariffs on all imports, especially the massive 145% tariff on Chinese goods, raised red flags again. Investors worry that tariffs will make goods more expensive — pushing up inflation, and in turn, forcing the Fed to stay hawkish for longer. Even the idea that inflation could return was enough to push yields higher.

2. The “Sell America” trend?

Investors could be starting to get spooked by the unpredictability of US policies — not just tariffs, but also other policy uncertainties. Some might have started pulling money out of US assets altogether — selling stocks, bonds, even the US dollar. That means less demand for Treasuries, and when demand falls, prices fall — and yields rise.

3. Liquidity stress

With markets tumbling, some investment funds — especially those investing in riskier assets — are facing redemptions from their investors, and might be forced to sell assets to meet the redemptions. And when such funds are scrambling to raise cash, they don’t sell only the “bad” stuff. Sometimes, they sell their safest assets too — including US Treasuries. That adds more selling pressure, driving yields up even further.

4. Hedge fund deleveraging

Hedge funds often play a strategy known as the “basis trade” — using massive leverage to exploit tiny differences between Treasury bond prices and futures. This is too sophisticated for this uncle, but what is important to know is when volatility spikes, these positions become unsustainable. So they start unwinding the trades — dumping Treasuries as a result, and adding to the selloff.

Before we move on to the last two drivers of the volatility, if you’ve enjoyed the contents so far, please give me a ‘like’ to support what I’m sharing on my channel. Appreciate your support! Alright, let’s jump back in. 

5. Usual safe haven is not enough, only the ultimate safe haven – cash – will do.

Perhaps this time round, many investors didn’t pile into Treasuries as a safe haven. Instead, they ran straight to cash, due to the extreme uncertainties. Record amounts of money have been hoarded recently, including putting into market market funds. This shows how nervous people are — they’re not even willing to take bond risk. It’s all about liquidity and flexibility now.

6. Fears about foreign selling — especially China.

Lastly, rumours have been swirling that China might be selling down its US Treasury holdings as retaliation for the tariffs. Now, there’s no solid evidence yet. But China does hold more than US$750 billion in Treasuries — so even whispers of them reducing exposure can unsettle the market. Less demand = lower prices = higher yields. 

The Dividend Uncle’s Take – Extreme Market Conditions & What This Means for REITs

Let’s bring this back to what we are facing currently. I believe the behaviour of the Treasury yields are reflective of the extreme market uncertainties we have right now. Under such situations, the textbook expectations of safe havens like Treasury bills rising during market volatility no longer applies. 

What does this mean for REITs?

Rising yields are bad news for most REITs. When 10-year Treasury yields rise, the “risk-free” return goes up — and REITs suddenly look less attractive. Borrowing also becomes more expensive, which impacts gearing and interest coverage. So it’s no surprise that REITs sold off hard this past week.

I believe that we are facing uncertainties that cannot be easily modelled or prepared for. But at the same time, I believe no one would want the markets to plunge. While I am preparing myself mentally for potential downturns in REITs and the stock market, I must say that I’m also not panicking. 

If the global economy continues to soften, and tariffs start hurting growth, I believe the US Fed will eventually respond. And when they do, yields will come back down.

Hence, I’m being selective in my investments as of now. Not all REITs are built the same. Some have strong balance sheets and long WALEs. Others are struggling with refinancing or asset impairments. I’m focusing on my core-satellite REIT strategy: Core REITs like C.I.C.T., M.I.T. and Parkway Life, while carefully managing my exposure to riskier satellite REITs.

And I’m keeping my cash allocation healthy. In volatile markets, cash is not a waste — it’s a weapon. It gives me the ability to take advantage of dips, without having to sell anything under pressure. I don’t need to predict the bottom — I just want to be ready.

Alright, that’s all for today. Look, the surge in yields is scary — especially if you’re watching your REIT prices swing wildly. But this is also what long-term investing is about.

Yields can spike, markets can fall, but if you’ve done your homework and built a portfolio that can withstand stress, you’ll be okay. More than okay — you’ll be in a great position to scoop up opportunities that others are too scared to touch.

If you found this post helpful, give this Uncle a like! Helps me keep bringing these market updates to you without freaking out the YouTube algorithm. Let me know in the comments — how are you handling this yield spike? Are you buying more REITs, sitting on cash, or taking a break?

Until next time, stay calm, stay diversified, and invest wisely.