Why U.S. Treasury yields may drop despite Trump
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Trump tariffs in focus
Autos fall
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WHY US TREASURY YIELDS MAY DROP DESPITE TRUMP
Global markets are grappling with uncertainty as President-elect Donald Trump's latest tariff threats raise questions: genuine policy shift or strategic negotiation ploy?
The answer is crucial because it will affect U.S. Treasury yields which rose 65 bps in the last two months on fears of inflationary policies.
"We think (U.S.) yields could fall further amid the combination of policy constraints to Trump's economic agenda and the Fed's easing," says Mark Haefele, chief investment officer at UBS Global Wealth Management.
"Markets recognize that the risks of higher inflation and interest rates are implicit constraints on his policy agenda, with eventual policy outcomes potentially less inflationary than some investors previously feared," he adds.
The U.S. 10-year yield US10YT=RR dropped 15 bps on Monday as markets cheered the pick of Scott Bessent for U.S. Treasury Secretary, who is expected to limit increases in fiscal spending and tariffs.
Haefele recalls that Bessent, in recent public comments, has suggested using tariffs as a tool for negotiations.
"It's not in the incoming Trump administration's best interest to proceed with a policy agenda that risks higher inflation, especially amid large federal budget deficits and rising net interest payments on the national debt," Haefele argues after recalling the high political cost of inflation.
(Stefano Rebaudo)
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