Bond Market Awaits News On Inflation, Tariffs And The Deficit

2025-01-23 14:15:00 ET

Summary

• It’s premature to rule out higher levels for the 10-year Treasury yield, which has been rising since September.
• One reason to be cautious is the recent rise in the 10-year rate’s 50-day average above its 200-day counterpart, which implies that an upside bias remains intact.
• Three key questions are lurking for bonds related to inflation, tariffs and the US government’s growing budget deficit.
• A complicating factor is President Trump’s plans for raising import tariffs, which some economists predict will be inflationary.

Is this the calm before the storm? Or has the danger passed? The bond market is focused on news and data in the days and weeks ahead that will provide context for answering these key questions. Meanwhile, Treasury yields have taken a break from the sharp upswing that’s dominated trading in recent months. In short, a wary calm prevails....

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