FX.co ★ US 10-Year Yield Rises to 3-Month High

The yield on the 10-year US Treasury note surged beyond 4.5% on Tuesday, reaching its highest level since February. This increase was fueled by improved trade flows that boosted growth prospects and influenced interest rates. The United States and China have mutually agreed to reduce tariffs on each other's goods for 90 days, alleviating fears that trade barriers could trigger a recession in the US this year. This agreement has led to a resurgence in investor confidence and a consequent rise in long-dated US Treasury yields. As a result, rate traders have adjusted their projections, now anticipating two rate cuts by December, down from the four cuts they had priced in just last week. This shift in expectations occurred despite an April Consumer Price Index (CPI) report that came in softer than anticipated. The report's muted impact is likely attributable to businesses stockpiling inputs ahead of the tariffs, which delayed the immediate effect of these levies on consumer prices.