(Bloomberg) — US Treasuries opened weaker as investors looked to rekindle the selloff spurred by Donald Trump’s presidential victory last week.
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Yields on the 10-year benchmark bond rose three basis points to 4.33% in early Asian trading on Tuesday. Cash markets were closed on Monday for a US holiday.
“Better economic data, perhaps a too-dovish Fed, and more policy details from the Trump administration could push Treasury yields higher,” a team of strategists at LPL Financial wrote in a Monday note. “It will take negative economic surprises for yields to fall meaningfully from current levels.”
Treasuries slumped on Wednesday after Trump won the presidency as investors amped up bets that policies like tax cuts and tariffs will fuel price pressures. That’s reinvigorating a focus on inflation just days after the Federal Reserve delivered a quarter-point interest-rate reduction.
Over the weekend, Minneapolis Fed President Neel Kashkari said the US economy has remained remarkably strong as the central bank progressed in beating back inflation, but the Fed was still “not all the way home.” A reading of October inflation data is scheduled for Wednesday.
“There’s a different landscape for fiscal conditions” after the election, said Janet Rilling, senior portfolio manager and the head of the Plus Fixed Income team at Allspring Global Investments. “Growth in the economy is strong. Jobs data is more muddied. Inflation is the one with most uncertainty. The Treasury market has been responding to data very efficiently.”
Traders in the swaps market expect a combined quarter-point move over the next two meetings and 60% odds of a December cut. One standout trade on Monday garnered attention in options linked to the Secured Overnight Financing Rate. The bet included a dovish hedge targeting two more quarter-point cuts for the December and January policy meetings.
To George Catrambone, head of fixed income at DWS Americas, the bond market likely remains “under the influence of the election results,” even though investors “ought to wait to see what ultimately becomes stated policy.”
On Wall Street, the uncertainty is pushing strategists to hold tight to their neutral recommendations in the wake of the election. Citi, JPMorgan and Morgan Stanley strategists are all neutral on bond duration after the election and latest Fed decision.
