Bond prices fall, pushing Treasury yields to seasonal high

On Monday, benchmark 10-year Treasury yields reached their highest levels since mid-June, starting off a week shortened by the upcoming Fourth of July holiday. This period is expected to see subdued trading volumes. The rise in yields, which inversely correlate with bond prices, was influenced by recent political events in France and the United States. Following the initial round of France’s national elections, where Marine Le Pen’s National Rally secured a smaller victory than anticipated, investors reacted cautiously.

Bond prices fall, pushing Treasury yields to seasonal high

In the U.S., the market’s response was also shaped by political developments. Analysts suggest that President Joe Biden’s recent debate performance may have altered investor expectations regarding the upcoming presidential election. Thierry Wizman, a strategist at Macquarie Group, noted, “Investors are possibly pricing in a higher chance of Donald Trump winning the election, which could lead to policies considered more inflationary compared to those of the Biden administration.”

Wizman further elaborated on potential policy shifts that might occur under a Trump presidency, touching on fiscal, tariff, and immigration policies. As a result, Treasury yields saw significant movement. The yield on the 10-year note rose by 10.8 basis points to 4.451%, while the 30-year bond yield increased by 11.1 basis points to 4.613%. Meanwhile, the yield on the two-year Treasury note, which often reflects interest rate expectations, climbed 6.7 basis points to 4.787%.

Market activity is anticipated to slow down as the week progresses, with trading set to conclude early on Wednesday. The bond market will remain closed on Thursday in observance of the Fourth of July. Additionally, a critical economic indicator, the yield curve between two- and 10-year Treasury notes, further dipped into negative territory, settling at -33.8 basis points, signaling investor concerns about future economic growth.

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