Bond market improvements disappear as Trump, and inflation continues to increase yields
(Bloomberg) – For U.S. Treasury Secretary Scott Bescent, the 10-year government debt yield is an important measure of President Donald Trump’s goal of winning low interest rates.
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However, three weeks after his second term, they rarely slip off much further.
It rose again on Friday as monthly employment reports expanded payroll at a solid pace in January, and revenues rose faster than expected, indicating an expansion in monthly employment reports. And it appears that Americans are preparing Trump tariffs to boost the costs of goods. Consumers predict that inflation rates, more than twice the Federal Reserve target, will exceed 4% over next year, according to a University of Michigan survey. .
The outcome: Bond traders expect yields to continue to rise and remain bound to range until they become more clear about where the economy is heading.
“We’ve seen a lot of effort into making our customers more comfortable,” said Priya Misra, Portfolio Manager at JPMorgan Asset Management.
Benchmark 10-year Treasury yields – a major baseline for consumer and corporate loans that rely heavily on long-term outlook – fell from its peak in early January. However, it remains at a nearly perfect percentage point than where it was in mid-September, after traders began preparing for an increase in national debt to put pressure on tariffs, tax cuts and financial prices. With inflation still stubbornly rising and the economy is raging, the Fed has suspended its rate cuts last month, priced it in that futures traders are likely to be on hold until September.
Bessent eased some of the market’s supply concerns last week. The Treasury has stabilized quarterly memos and bond auctions, indicating that there will be no changes in at least the next few quarters.
But analysts remain cautious as Trump defeated the sudden destruction from former President Joe Biden’s policy. At the same time, it remains unclear how deeply Trump will try to cut taxes, and what it will do to the size of the government’s deficit.
“We’re not in an environment where you want to make big bets,” said Ed Al Husseini, globally-rate strategist at Colombia Thread Needle.