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Treasury Secretary Scott Bessent’s Thursday comment is credible: “The President wants lower rates. He and I are focused on the 10-year Treasury and what is the yield of that.”
“Everyone has a plan, until they get punched in the mouth” (Mike Tyson). The Trump administration definitely has some grandiose plans. Dressed in baggy attire and too often projecting a pacifist temperament, but when pushed too far, the bond market can reveal the inner brute force of a prizefighter. Global bond markets have been agitated over recent months. The resurrected bond vigilantes have been circling.
But global bonds have enjoyed a nice rally of late. After trading at 4.80% on January 14th, 10-year Treasury yields touched a seven-week low 4.40% during Wednesday trading. UK gilt yields dropped from a 4.92% trading high to 4.37%; French yields 3.49% to 3.05%; German yields 2.65% to 2.34%; Italian yields 3.85% to 3.43%; Canadian yields 3.56% to 2.88%; and Australian yields 4.66% to 4.29%.
Sinking Treasury yields were especially pacifying for distressed EM bonds. Brazil’s dollar bond yields sank from 7.11% to 6.49%, with Mexico’s yields falling from 6.80% to 6.38%. Local currency yields swung from 10.46% to 9.71% in Mexico and from 15.44% to 14.31% in Brazil.
This blog post was published as a full article here.
