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[Bloomberg]( Trump hits Mexico with tariff threat, China plans “major” retaliation, and bonds reach new records. Peso hit President Donald Trump said he will impose a 5% tariff on Mexican goods, taking effect on June 10, if the country does not stop immigrants from illegally entering the U.S. The White House warned that the levy could [rise as high as 25% by Oct. 1]( if the issue is not remedied. The Mexican peso weakened by as much as 3% as investors mull the[ long list of goods]( that would be hit by the move. It all dims the prospect of a trade deal with China as the president shows he is willing to [arbitrarily impose punitive trade measures](, according to analysts. Major retaliation Speaking of China, the Asian nation is progressing with plans to [restrict exports of rare earth minerals to the U.S.](, if needed, as people familiar with the matter say it is ready to go as soon as the government gives the go-ahead. The editor of a ruling Communist Party newspaper said authorities in Beijing plan a “[major](” retaliation against the U.S. The news comes as economic data continues to show a [worse-than-expected performance](, with manufacturing PMI falling further below 50. Sponsored Content by MongoDB Application Modernization Factory Organizations are under pressure to be better, faster, or cheaper than the competition – but companies encumbered with legacy systems can find it impossible to stay relevant with more nimble opposition. MongoDB is helping thousands of organizations to free themselves from legacy systems. [Learn how](.  Everyone is buying bonds The yield on Germany’s 10-year bond fell to minus 0.209% this morning, [the lowest ever](. U.S. Treasury yields are tumbling further, with the 10-year at 2.151% by 5:45 a.m. Eastern Time, and the two-year [dropping below 2%](. Even Greek bonds are getting in on the action with the 10-year yield below 3% for the first time on record. Analysts are quickly revising their bond projections, with some seeing the benchmark U.S. yield [falling to 1.5%](. The market is currently pricing-in three Federal Reserve rate cuts by the end of next year, with Vice Chairman Richard Clarida yesterday giving a hint that the bank would be open to [reducing rates]( if the economy declines. Markets fall Overnight, the MSCI Asia Pacific Index was broadly unchanged, while Japan’s Topix index closed 1.3% lower as automakers fell in the wake of Trump’s latest tariff move. In Europe, the Stoxx 600 Index was 1.4% lower at 5:45 a.m. as companies with large exposures to Mexico such as BBVA, Banco Santander SA and Fiat Chrysler Automobiles NV bore the brunt of the selloff. S&P 500 futures pointed to a [fairly substantial drop at the open]( and gold rallied. Coming up... With the Treasury market in full-on rally mode, today’s PCE report – the Fed’s preferred inflation gauge – will be closely read by investors when it is [published at 8:30 a.m.]( Canadian first-quarter GDP is also due at 8:30 a.m. Atlanta Fed President Raphael Bostic and New York Fed President John Williams are scheduled to speak later. Consumer sentiment data is released at 10:00 a.m. and the latest Baker Hughes rig count is at 1:00 p.m. What we've been reading This is what's caught our eye over the last 24 hours. - Trump “[gone rogue](” on trade is the last thing the global economy needs. - Is there really a [global shortage]( of crude oil? - Bitcoin’s rally masks uncomfortable fact: [Almost nobody uses it](. - Barclays London stocks unit is thriving on [tax-reduction trades](. - HSBC plans hundreds of investment bank [job cuts](. - The [new poster child]( for European markets is… Greece. - Mathematicians take a step closer to solving the [Riemann hypothesis](. And finally, here’s what Luke's interested in this morning The strength of the eye-popping global sovereign bond rally has some searching for reasons why it’s due to come to an end – especially in its epicentre, U.S. Treasuries. In a nod to these technicals, Bespoke Investment Group observes that the 10-year yield is oh-so-stretched, trading more than two standard deviations below its one-year average. Aberdeen thinks USTs are a sell because the Fed won’t be as willing to cut as much or as soon as market participants anticipate. Demand at auctions (including this Wednesday's) hasn’t always been stellar. The wind-down of short-volatility trades in Treasuries could remove some of the fuel from the bond rally. But there’s also cause to suspect the fund managers musing about a 2% 10-year yield aren’t blowing smoke. For one, the 10-year yield still trades at a premium to what 31 major investment firms think the federal funds rate will average over the next decade – a survey that was most recently completed before the re-escalation of the trade war, and therefore more likely than not to see an additional move to the downside. Goldman Sachs’ current activity indicator for the U.S. is firmly in negative territory, at its lowest level since 2016. The most recent Chinese manufacturing PMI data also disappointed, pointing to contraction in the sector. All told, the bond market is bellowing that an inflection point for the Fed is nigh – it’s just a matter of whether the central bank will be proactive or reactive, and how much, and how soon, cuts arrive. Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. [Learn more](. 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