By Davide Barbuscia
NEW YORK- US Treasury long-term yields rose on Tuesday, as a sharp bond rally lost momentum and investors assessed US President-elect Donald Trump’s tariff pledges.
Trump said on Monday he would impose tariffs on products from Canada, Mexico and China, sparking volatility as investors braced for trade disputes. The announcement came after a sharp rally in bonds triggered by Trump’s pick of hedge fund manager Scott Bessent as US Treasury Secretary.
The backup in yields reflected the risk of rising inflation under higher tariffs, some investors said. It was also an indication that technical factors that contributed to the earlier rally had lost some steam, said Subadra Rajappa, head US rates strategy at Société Générale.
Investors digested a handful of economic data on Tuesday indicating the economy remained on solid footing. This included Federal Housing Finance Agency data showing US single-family house prices increased solidly in September, as well as the November reading of Consumer Confidence released by the Conference Board, which was in line with expectations.
Minutes of the Nov. 6-7 Federal Open Market Committee meeting, which were released on Tuesday, showed Federal Reserve officials appeared divided at their meeting over how much farther they may need to cut interest rates, though many said it was appropriate to reduce policy restraint gradually.
Short-term Treasury yields declined after the release, while rates futures traders marginally increased their bets on a 25 basis point cut at the Fed’s rate-setting meeting next month. A December cut had a 60 percent probability later on Tuesday, up from 56 percent earlier in the day, CME Group data showed. – Reuters
