U.S. Treasury demand stays weak as yields edge higher amid policy and economic uncertainty

Investor demand for U.S. Treasury bonds has remained subdued into the third consecutive week, with yields settling near previous levels amid uncertainty over economic and policy developments. The 2-year yield edged up to 3.741%, the 10-year yield rose 0.008 bps to 4.25%, and the 30-year yield climbed slightly over a basis point to approximately 4.83% [1]. These minimal shifts reflect a market struggling to reconcile conflicting signals on inflation risks and economic weakness [2].

Investors continue to grapple with the implications of potential U.S. tariff hikes and the Federal Reserve’s next steps in monetary policy. The 10-year yield remains constrained as market participants weigh the risk of inflation from tariffs, which could delay rate cuts, against a weakening economy that might necessitate them [1]. Steve Hou, a quant researcher at Bloomberg, noted that investors are taking a few days to digest a busy week that included a surprisingly strong July nonfarm payrolls report and the Fed’s evolving stance [3].

The recent jobs report, which showed a disappointing performance in August, has also influenced demand for “safe assets” such as Treasuries, according to Jurrien Timmer of Fidelity [4]. Timmer highlighted that dips in the 10-year yield since 2022 have been short-lived, suggesting that the market is still processing underlying macroeconomic tensions. The 10-year yield’s movement continues to reflect a coiled dynamic that has “ground forward” without a clear direction [4].

Political developments at the Federal Reserve have further complicated the outlook. U.S. President Donald Trump announced the likely nomination of Stephen Miran, currently Chair of the Council of Economic Advisors, to replace Adriana Kugler on the Fed Board of Governors. Miran is expected to serve through January 31, 2026, and Trump has also signaled his intent to nominate a “shadow chair” to replace Jerome Powell [5]. This anticipated shift in leadership raises expectations that the Fed may adopt a policy stance more favorable to rate cuts, aligning with Trump’s economic agenda [5].

Market analysts have also questioned the role of the 10-year Treasury bond as a safe-haven asset. Rob Kaplan of Goldman Sachs noted that the bond has not been behaving like one in recent months, with growing concerns over deficits for longer-maturity instruments [6]. Jan Hatzius of the same firm added that the 10-year rate now reflects the U.S. economy’s growth trend, implying a smaller-than-expected fiscal deficit [6]. Meanwhile, Ashok Varadhan of Goldman Sachs pointed out that U.S. Treasury yields have reached levels that are attractive to private investors, suggesting a potential shift in capital flows toward sovereign debt [7].

Market watchers will be closely monitoring upcoming Treasury auctions as a litmus test for demand. Jens Sorensen of Danske Bank observed that U.S. Treasuries saw only modest movement during Asian trading hours, with the 10-year and 2-year yield curve remaining inverted but showing signs of modest flattening [8]. A stronger-than-expected demand in these auctions could signal a shift in investor sentiment, but for now, the market remains in a holding pattern.

Sources:

[1] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

(url: https://coinmarketcap.com/community/articles/6895f4af05f6c41c6f2e4367/)

[2] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[3] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[4] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[5] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[6] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[7] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle

[8] title: Demand for U.S. Treasury bonds underwhelms into third week as yields settle