Treasuries Fall as Tariff Uncertainty Clouds Outlook Before Data

Treasuries experienced a selloff, particularly in longer maturities, driven by uncertainty surrounding President Trump's tariff policies. The 10-year yield rose four basis points to 4.44%, while the spread between five- and 30-year yields neared a level not seen since 2021. These movements occurred alongside declines in US equity futures and a weakening dollar.

Analysis

US Treasuries commenced the week with a notable decline, predominantly affecting longer-dated maturities, driven by persistent uncertainty surrounding President Donald Trump's tariff policies. This selloff pushed the 10-year Treasury yield up by four basis points to 4.44%. Concurrently, the spread between 5-year and 30-year yields expanded, approaching the 100 basis point mark, a level not sustained since 2021. This steepening of the yield curve occurred within a broader context of weakening US assets, as indicated by declining US equity futures and a dollar index nearing its lowest valuation since 2023. The market sentiment is strongly negative, reflecting a bearish outlook as investors await key economic data releases expected later in the week, which could provide further clarity on the health of the US economy amidst these policy uncertainties.

Key Decisions for Investors

• Investors should exercise caution and closely monitor upcoming US economic data releases, as they will be critical in assessing the economic impact of tariff uncertainties and guiding Treasury market direction.
• The observed steepening of the yield curve, with the 5s30s spread nearing a multi-year high, warrants a review of fixed-income portfolio duration and positioning to manage potential interest rate volatility.
• Given the broad-based selloff in US assets and the strongly negative sentiment, investors might consider adopting defensive strategies or increasing vigilance regarding overall market exposure until greater clarity on trade policy emerges.