US 10-Year Yield Eases

The yield on the US 10-year Treasury note fell to around 4.04% on Thursday, trimming gains from the previous session as uncertainty over US tariffs bolstered demand for safe-haven debt. On Wednesday, US Trade Representative Jamieson Greer indicated that tariff rates for certain countries could rise to 15% or higher from the recently implemented 10%, without providing additional details. President Donald Trump offered relatively muted tariff commentary in his State of the Union address but reaffirmed that he does not plan to alter course, even after the Supreme Court invalidated his broad reciprocal tariffs. On monetary policy, the Federal Reserve is widely expected to keep interest rates unchanged next month. Meanwhile, US and Iranian negotiators are scheduled for the latest round of nuclear talks in Geneva later today, reinforcing a cautious tone across markets.

The yield on the US 10-year Treasury note rose to 4.06% on Wednesday, rebounding from near three-month lows touched earlier in the week. The earlier decline followed President Trump’s announcement of a blanket tariff on all imports, after the Supreme Court rejected his reciprocal tariff proposal. However, the levy came into effect at a lower-than-expected 10% rate, easing safe-haven demand and pushing yields higher. Meanwhile, money markets have scaled back expectations for Federal Reserve rate cuts. The probability of a quarter-point reduction by June has fallen to 50%, the lowest level so far this year, while expectations of a third cut by year-end have nearly disappeared. Investors will also monitor speeches from several Fed officials this week for further guidance on the policy outlook, as well as the US Treasury’s $70 billion auction of new five-year notes. Tuesday’s two-year note sale was broadly in line with the when-issued level.

The yield on the 10-year US Treasury steadied around 4.05% on Wednesday after coming under pressure earlier in the week, supported by expectations that the Federal Reserve will keep interest rates unchanged for an extended period. Fed official Susan Collins noted that maintaining rates is likely appropriate amid an improving labor market and persistent inflation risks, while Thomas Barkin added that monetary policy is well-positioned to manage economic risks. Despite this, markets continue to price in roughly three 25-basis-point rate cuts from the Fed this year. On the trade front, the US began collecting a temporary 10% global tariff on Tuesday, which the White House is seeking to raise to 15%, following the Supreme Court’s rejection of Donald Trump’s reciprocal tariffs last week. Meanwhile, Trump highlighted his administration’s policies and economic achievements in his State of the Union address, declaring that the country is stronger than ever.