The yield on the 10-year US Treasury note climbed above 4.34% on Thursday, marking its highest level in over two weeks, as investors weighed the broader outlook for US economic growth and borrowing costs amid uncertain trade policies.
US 10-year yield holds at two-week high
This increase came despite softer-than-expected inflation data, with both headline and core producer prices surprising to the downside in February, reinforcing the trend seen in consumer price inflation. However, certain segments of the price basket, including energy and select goods, introduced doubts about the sustainability of the disinflation momentum, keeping traders cautious.
Adding to the uncertainty, escalating trade tensions have complicated the economic outlook. President Trump’s latest threat to impose a 200% tariff on EU alcoholic beverages in retaliation for the bloc’s new countermeasures has raised fears of a potential trade war, which could disrupt supply chains and put upward pressure on prices. These concerns have driven some investors toward the safety of Treasuries since the start of the month, but demand has been concentrated on shorter-duration bonds, leading to a significant outperformance of the 2-year note relative to the 10-year.
Market sees Fed to cut rates
Meanwhile, rate derivatives continued to signal that markets expect the Federal Reserve to implement three 25bps rate cuts this year. Investors are now closely watching the Fed’s upcoming policy meeting for further guidance on the future path of interest rates, particularly in light of evolving inflation trends, labor market resilience, and global trade uncertainty.
