The US 10-year Treasury yield held around 4.18% on Tuesday after rising sharply in the previous session, as investors reassessed the outlook for economic growth and inflation amid rapidly evolving trade developments.
US 10-year yield holds advance
Yields had recently come under pressure as escalating trade tensions—driven by President Donald Trump's aggressive tariff stance—sparked recession fears and drove a flight to safe-haven assets. However, those concerns eased slightly after Trump signaled a willingness to engage in trade negotiations with key partners, softening the tone that had rattled markets just days earlier.
Treasury Secretary Scott Bessent added that nearly 70 countries have contacted the White House seeking tariff discussions, suggesting potential diplomatic openings that helped stabilize risk sentiment. The yield's modest rebound reflected a recalibration of market expectations—not necessarily signaling optimism, but rather a pause in the recent rush to safety.
Eyes on next Fed moves
On the monetary policy front, Chicago Fed President Austan Goolsbee said that the central bank would need to base its decisions on hard data rather than market noise, emphasizing a data-dependent path forward. His comments echoed a broader consensus among Fed officials to remain cautious and flexible as they navigate the uncertain landscape shaped by both international trade frictions and lingering inflation pressures.
Investors are now squarely focused on this week’s inflation data, particularly the Consumer Price Index (CPI) report, which could prove pivotal in shaping expectations for potential rate cuts in the months ahead. A softer-than-expected reading could reinforce the case for a Fed pivot later this year, while a surprise on the upside might delay easing and push yields higher. Market pricing currently reflects a roughly 75% chance of a rate cut by July, though those odds could shift quickly depending on incoming data and geopolitical developments.
