Treasury yields were holding steady at higher ground after the release of minutes from the Federal Reserve’s November policy meeting.
Yields climbed earlier in the session after President-elect Donald Trump late Monday threatened to quickly impose tariffs on Mexico, Canada and China, a move that rattled global markets.
What’s happening
- The yield on the 2-year Treasury was 1 basis points higher at 4.288%.
- The yield on the 10-year Treasury rose 5 basis points to 4.315%.
- The yield on the 30-year Treasury climbed 4 basis points to 4.485%.
What’s driving markets
The benchmark 10-year Treasury yield was steady, but moved higher a day after its biggest daily slide since early August, as investors poured over the Fed’s minutes from its November meeting.
The minutes showed that many members of the rate-setting committee observed “uncertainties” about the neutral level of interest, making “it appropriate to reduce policy restraint gradually.”
Monday’s sharp rally in U.S. government bonds was cut short by President-elect Donald Trump’s threat late Monday to slap 25% tariffs on all imports from Canada and Mexico and an extra 10% on Chinese goods on his first day in office in January.
“At the end of the day, Trump isn’t exactly known for taking on advice, and many of his advisers have been booted out of the administration in the past after having been branded as incompetent just for pushing back on some of his ideas,” Daniela Sabin Hathorn, senior market analyst at Capital.com, wrote in a Tuesday client note.
Hathorn called the tariff threat a “wake-up call” for investors feeling optimistic at the start of Thanksgiving week following Trump’s pick of hedge-fund manager Scott Bessent as Treasury secretary, which stirred hopes that it could mean a less radical approach to trade policy and a better chance of tackling the U.S. government budget deficit.
Stephen Innes, managing partner at SPI Asset Management, said the abrupt pivot on policy could send shock waves through bond markets, as the “Bessent bond bid” — a term coined in hopeful anticipation of steadier fiscal waters — may evaporate as quickly as it appeared.
Fed-funds futures showed nearly a 60% chance that the Fed will cut rates by 25 basis points, from the current range of 4.50% to 4.75%, at its next meeting on Dec. 18, according to the CME FedWatch Tool. There was a 40% probability the central bank would stand pat on rates.
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