Investors in New York, NY are closely monitoring the US bond market, which has begun to stabilize after a turbulent two-month selloff. The rise in 10-year Treasury yields since mid-September has been driven by factors such as Donald Trump’s presidential victory, persistent inflation, and robust economic data, keeping investors on edge about the future direction of yields.
Following a peak above 4.5% on Nov. 15, the global benchmark swiftly reversed its course as large purchases flooded the market, preventing further breaches of that level. With 10-year yields closing at 4.4% last week and dropping to around 4.36% in Asian trading on Monday, market participants are reacting to the recent appointment of Trump’s Treasury secretary, Scott Bessent.
Fund managers believe that Treasury yields above 4% are attractive and serve as a hedge against potential declines in the equity market. Erin Browne from Pacific Investment Management Co. noted that if the 10-year yield were to rise back to 5%, she would consider increasing her investments more aggressively.
Despite expectations that the bond market would rally as the Federal Reserve cut interest rates, yields have continued to rise since September. Scott Bessent, known as a ‘fiscal hawk,’ has been nominated as the next US Treasury secretary. Bessent’s views on fiscal policy and government debt management have garnered mixed reactions from Wall Street.
Uncertainties surrounding Trump administration policies, such as tariffs and fiscal stimulus, have left investors cautious, with many choosing to adopt a wait-and-see approach. While some strategists view fair value for the 10-year yield as between 4.25% and 4.5%, others anticipate further volatility given the uncertain inflation outlook and the impact of Trump’s policy decisions.
As traders look ahead to key economic data releases and the Federal Reserve’s preferred inflation measure, the bond market remains on edge, with thin trading volume potentially leading to significant price swings. The upcoming period is expected to be pivotal in determining the future trajectory of Treasury yields, with many closely monitoring market indicators for potential catalysts.
