Recently, the U.S. financial markets have witnessed one of the most tumultuous periods in recent history. The significant surge in long-term Treasury yields has become a prime example of unusual trading activity following President Trump's tariff-driven "Liberation Day." This event has caused substantial fluctuations in both 10-year and 30-year yields, raising questions about their future trajectory.
In the wake of the reciprocal tariffs imposed by President Trump, the 10-year yield (^TNX) surged by an additional 10 basis points early Wednesday, reaching approximately 4.34%. This movement represents a massive 47-basis-point swing from Monday's low of 3.87%. Similarly, the 30-year yield (^TYX) climbed another 15 basis points on Wednesday, extending its gains after recording its largest upward move since March 2020. Prior to Wednesday's opening, the 30-year yield was trading at 4.89%.
Mark Newton, managing director and head of technical strategy at Fundstrat Global Advisors, expressed his views during an interview with Yahoo Finance on Tuesday. He noted that there had been a noticeable slowdown in the dramatic reversal of Treasuries in recent days. Despite acknowledging the potential for yields to increase further over the coming weeks, Newton anticipates a steady decline in the 10-year yield between now and fall, eventually hitting 3.5%. He attributes this expected decline not necessarily to economic growth faltering but potentially to inflation decreasing more rapidly than anticipated.
On Wednesday, HSBC maintained its forecast of a 3.5% yield for the 10-year bond. In a research note, they stated that their scenario analysis supports a further decline in yields by year-end, as valuations are influenced by conflicting concerns regarding the policy outlook.
As market participants grapple with these unprecedented fluctuations, analysts remain cautious yet optimistic about the trajectory of Treasury yields. While short-term volatility may persist, the consensus leans towards a gradual decrease in yields as underlying economic factors come into play.