The yield on the 10-year US Treasury note held early losses at below the 4.5% mark on Wednesday, the lowest level in seven weeks. This decline was supported by strong demand for safe assets amid growing uncertainty and expectations of multiple rate cuts by the Federal Reserve later in the year, despite fresh evidence of a robust labor market.
US 10-year yield falls to seven-week low
Investors sought the relative security of government bonds as markets grappled with a range of concerns, including the US’s recent enactment of a 10% tariff on all Chinese goods at the beginning of the month. In response, China announced it would impose tariffs on US energy goods starting next week, raising the possibility of further escalation in trade tensions between the two largest economies. These developments added to the risk sentiment, as market participants worried about the broader implications for global trade.
Trump's comments on Gaza boosted demand for safe assets
Demand for safe assets was further bolstered by geopolitical risks, particularly President Trump’s remarks on deploying forces and mobilizing residents in the Gaza Strip, which heightened concerns over the potential for broader regional instability. While the US economy showed resilience with new data revealing the addition of more than 180,000 private sector jobs in January—exceeding expectations of 150,000—rate futures continued to reflect optimism that the Fed would cut interest rates twice this year. This persistent belief in rate cuts, despite strong labor market data, indicated that investors were more focused on concerns about inflation and economic slowdowns in the longer term.
Further factors
Additionally, Treasury demand was supported by an increase in the Treasury General Account (TGA) and lower borrowing expectations ahead of the Quarterly Refunding Announcement, which indicated a reduced need for government debt issuance in the near term. This combination of economic data, geopolitical risks, and Fed expectations contributed to the continuing demand for Treasuries, helping to keep the yield on the 10-year note well below the 4.5% threshold.
