FX.co ★ US 10-Year Yield Declines

On Wednesday, the yield on the 10-year US Treasury note declined to 4.35% as the market absorbed new trade policy developments and evaluated their possible effects on future interest rates and risk premiums. According to minutes from the Federal Open Market Committee's recent meeting, the majority of policymakers anticipate that several rate cuts will be necessary this year. However, some members view tariffs as inflationary, leading to expectations that rate cuts may not occur this year. Futures markets for interest rates maintained expectations for a rate cut in September, followed by another in December. The 10-year note also benefited from strong demand during the most recent auction. Simultaneously, President Trump expanded tariffs on additional countries and threatened significant duties on copper, semiconductors, and pharmaceuticals. Bond investors also noted Trump's statements suggesting that the Federal Funds rate should be approximately 300 basis points lower, aligning with the anticipated nomination of a dovish candidate next year, contributing to increased long-term inflation expectations.