Following Donald Trump's election victory on November 4, 2024, U.S. Treasury yields experienced fluctuations influenced by both domestic political developments and international tensions. As of November 12, 2024, the 10-year Treasury yield rose to 4.3550%, while the 2-year yield increased to 4.3149%, largely driven by concerns over inflation and anticipated changes in federal spending under a Republican administration. [41332c9c]
On November 14, 2024, the 10-year Treasury yield rose nearly 2 basis points to 4.469%, while the 2-year Treasury yield increased around 2 basis points to 4.301%. Investors were closely monitoring upcoming economic data, including weekly initial jobless claims and the October producer price index (PPI), which was expected to show a 0.2% increase. [b354a61d]
Jim Bianco, President of Bianco Research, highlighted that Trump's presidency could stimulate the U.S. economy but also raises significant inflation risks. He advised investors to brace for rising yields and a stronger dollar, suggesting that the bond market may become more attractive compared to equities. [55c12180]
Recent analysis from UBS indicated that rising yields could negatively impact equities, particularly tech and growth stocks, due to their reliance on future profit valuations. The firm noted that in 2022, high inflation and Federal Reserve rate hikes had already hurt equities. However, the recent increases in yields are driven by hopes of stronger economic growth following Trump's election. In October alone, real 10-year yields rose by 36 basis points. UBS expects a decline in Treasury yields moving forward, bolstered by enthusiasm for AI technologies helping markets absorb higher yields. [8b41b5b2]
The Federal Reserve's recent decision to cut the federal funds rate to a range of 4.5%-4.75% on November 1, 2024, aimed to support economic growth amid these uncertainties. However, the market's response has been multifaceted, with bond yields continuing to rise despite the Fed's efforts. [45ec038a][68a61146]
Federal Reserve Chair Jerome Powell is scheduled to discuss the U.S. economic outlook in Dallas, Texas, alongside remarks from Fed Governor Adriana Kugler, Richmond Fed President Tom Barkin, and New York Fed President John Williams. This discussion comes at a critical time as traders consider the possibility of another rate cut in December. [b354a61d]
Recent reports indicate that U.S. Treasury market gains for 2024 have dwindled to about 0.7% from a peak of 4.6% on September 17, raising concerns among traders about Trump's return and the potential for slower interest-rate cuts from the Federal Reserve. The 10-year yields have climbed to 4.5%, marking the highest level since May. [249cc7d5]
Minneapolis Fed President Neel Kashkari has commented on the robust U.S. economy and ongoing inflation concerns, complicating the outlook for bond investors. Analysts at LPL Financial noted that better economic data and expected Trump administration policies could further drive yields higher. [55c12180]
As traders awaited key economic data, including the NFIB Business Optimism Index and inflation reports, there was a 65% chance of another rate cut in December. The October Consumer Price Index (CPI) was expected to show a month-over-month increase of 0.2% and a year-over-year rise of 2.5%. [41332c9c]
On November 19, 2024, U.S. Treasuries rose amid speculation regarding Trump's potential Treasury Secretary pick, Kevin Warsh, a former Fed governor, who has a 44% chance of being appointed according to Polymarket. This speculation coincided with heightened geopolitical tensions due to Russia's nuclear threats following U.S. support for Ukraine. As a result, two-year yields fell to their lowest in 11 days, while 10-year yields dropped below 4.35%. [5ee52642]
Michael Plage from Fidelity pointed out that rising yields can occur even during periods of Fed rate cuts, indicating that factors beyond interest rate adjustments are influencing the market. Jay Barry from J.P. Morgan warned that anticipated increases in Treasury issuance under Republican leadership could further pressure the bond market. [68a61146]
Mark Dowding has predicted that 30-year yields may rise toward 5%, reflecting a broader narrative of uncertainty and volatility in the bond market. Treasury market returns are trailing cash returns for the fourth consecutive year, highlighting the challenges facing investors. [249cc7d5]
As the bond market adjusts to these developments, analysts are closely monitoring economic indicators and Fed communications for further insights. The current state of the bond market, characterized by a steepening yield curve, reflects a broader narrative of uncertainty and volatility, making predictions increasingly challenging. [4b4e3673][0108c6ff]