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According to ING, several factors have contributed to recent declines in US Treasury yields, signaling market hesitation over fiscal and monetary policy dynamics. These factors include the following:

• Fiscal efficiency measures: So far, $55 billion in cost savings have been logged toward the $2 trillion spending cut target. ING noted that the feasibility of achieving this remains uncertain and cautioned that if implemented aggressively, these cuts could weigh on GDP growth, dampening inflationary pressures and reducing the need for higher yields.
• Treasury policy goals: Treasury Secretary Bessent has expressed a preference for lower long-term yields, signaling a potential shift in bond market dynamics to accommodate fiscal adjustments.
• Liquidity adjustments: Possible changes to the supplementary liquidity ratio (SLR)—such as excluding Treasuries from capital requirement—could increase demand for US bonds, keeping yields contained.

Despite these downward pressures, the 10-year Treasury yield has fallen to 4.3% from 4.8% in mid-January. Recent market pricing suggests that the Fed Funds rate could fall to 3.68% by April 26, though expectations for near-term easing don’t see a cut until June.

Key Tariff Deadlines to Watch

With fiscal policy providing short-term support for the US dollar, the trade narrative is becoming a dominant market driver. Several tariff deadlines are approaching, each with the potential to increase volatility across Forex markets and risk assets. These deadlines are as follows:

• March 4: This will mark the end of the tariff pause on Mexico and Canada imports.
• March 12: 25% tariffs on steel and aluminum will be set to take effect.
• April 1: This will mark the completion of the US trade policy review, which could lead to further tariff announcements.
• April 2: 25% auto tariffs will take effect, directly impacting global trade flows and major economies, particularly the EU, Japan, and Mexico. 

Bottom Line

While fiscal policy has temporarily steadied the US dollar, tariff risks are re-emerging as a dominant market force. Expect increased volatility in the coming weeks, and expect to see it in broader risk assets, as markets react to the evolving US trade policy landscape.

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