The yield on the 10-year US Treasury note held steady around 4.33% on Thursday, maintaining its position after a notable decline in the previous session. The move reflects strong investor interest in long-term US debt, driven by:

• Robust demand in the Wednesday 10-year note auction

• Growing market consensus for interest rate cuts later in 2025

• New geopolitical and trade policy developments introduced by President Donald Trump

Bond Auction Triggers Yield Slide

Wednesday’s 10-year bond auction saw:

• High bid-to-cover ratio, indicating strong demand

• Participation by both foreign and domestic institutional investors

• Downward pressure on yields, which move inversely to bond prices

This sharp rally in Treasury prices pushed the 10-year yield down significantly before stabilizing on Thursday. The yield curve, especially the long end, has been under close watch as a signal of economic expectations and Fed policy direction.

Fed Minutes: Dovish Tilt Emerges

Minutes from the Federal Open Market Committee (FOMC) meeting held June 17–18 were released Wednesday, and they revealed a softening policy stance. Key takeaways include:

• Most Fed officials favor a rate cut later in 2025, assuming favorable data

• Inflation is easing and considered “modest or temporary” in recent readings

• The Fed remains data-driven, with flexibility to adjust based on macroeconomic shifts

This reinforced market optimism for lower rates ahead, which supports longer-duration Treasuries, especially the benchmark 10-year note.

Trump Calls for Aggressive Rate Cuts

Adding to the bond market’s momentum, President Donald Trump posted on Truth Social, urging the Fed to slash its benchmark rate by 300 basis points, arguing it would ease the burden of refinancing the national debt.

“Our Fed Rate is AT LEAST 3 Points too high… LOWER THE RATE!!!” Trump wrote, adding that high rates cost the U.S. "$360 billion per point annually."

This unprecedented political pressure, combined with hints of a dovish Fed nominee for 2026, triggered market chatter that monetary policy could shift faster than previously expected, potentially boosting bond prices further.

Inflation Expectations and Policy Watch

While bond yields dropped, inflation expectations rose slightly, reflecting concerns that:

• Massive tariffs could raise input costs in some sectors

• Trump’s trade stance might introduce supply-side constraints

• Looser monetary policy could overheat parts of the economy

However, many analysts believe any tariff-led inflation will likely be mild and transitory, given the softening global demand backdrop and ongoing disinflation trends in core sectors.

Trade Tensions Add to Yield Volatility

President Trump’s decision to impose:

• A 50% tariff on Brazilian imports, and

• 25% to 30% tariffs on the Philippines, Brunei, Moldova, Algeria, Iraq, Libya, and Sri Lanka

starting August 1, added new complexity to the macro landscape.

While the bond market has not yet priced in major disruptions, further escalation in trade wars could prompt both safe-haven buying of Treasuries and policy recalibration at the Fed.

Markets are also anticipating:

• Progress or setbacks in US-India and US-EU trade agreements

• Clarity on tariff exemptions or retaliation from affected nations

Conclusion

The US 10-year Treasury yield hovering at 4.33% signals a stabilized yet cautious outlook among investors. Strong auction demand, Fed minutes confirming possible 2025 rate cuts, and Trump’s intensified trade and monetary rhetoric are collectively shaping a complex bond market narrative. As inflation remains under control and political speculation grows, yields may stay rangebound unless upcoming economic data or geopolitical developments deliver a fresh jolt.

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