The yield on the 10-year US Treasury note dropped below 4.6% on Tuesday, continuing its decline from the one-year high of 4.8% on January 14th.
US 10-year yield drops further from one-year high
This came as markets evaluated the US economic outlook following a series of executive orders from President Trump. The President indicated that tariffs on Canada and Mexico could be imposed starting in February but did not signal trade restrictions on China.
Risk of higher costs diminishes
As a result, the risk of higher costs for essential manufacturing inputs contributing to persistent inflation—and forcing the Federal Reserve to maintain a hawkish stance—was somewhat diminished. This move aligned with earlier reports that Trump would consult with his team and avoid immediate changes to trade policy on his first day in office. Consequently, markets have priced in one rate cut by the Fed, expected in the third quarter of this year.
