US Treasuries Set for First Monthly Loss of 2025 on Deficit Woes

US Treasuries are poised for their first monthly loss of 2025, with a Bloomberg index tracking the bonds down over 1.2% in May, as all maturities faced pressure amid renewed tariff uncertainty and increasing concerns about rising government debt levels. The 30-year yield rose for the third consecutive month, marking its longest losing streak since 2023, while two- and ten-year tenors posted their first monthly increase this year.

Analysis

US Treasuries are experiencing their first monthly decline in 2025, with a key Bloomberg bond index registering a loss exceeding 1.2% in May. This downturn is attributed to a confluence of renewed uncertainties surrounding tariff policies and escalating concerns regarding the substantial levels of government debt. The pressure has been broad-based, affecting all maturities. Notably, the 30-year Treasury yield has risen for the third consecutive month, marking its most prolonged period of increase since 2023. Concurrently, yields on both two-year and ten-year Treasuries have recorded their first monthly ascent this year, signaling a shift in investor sentiment and risk perception within the fixed-income market.

Key Decisions for Investors

• Investors should closely monitor upcoming fiscal policy announcements and developments in international trade relations, particularly concerning tariffs, as these factors are directly impacting Treasury valuations.
• Holders of US Treasuries may need to reassess their portfolio's sensitivity to interest rate changes, considering the recent upward movement in yields across the curve and the potential for continued volatility.
• Given the concerns over mounting government debt, it is advisable to evaluate the potential for sustained higher yields and their broader implications for fixed-income allocations and overall investment strategy.