Trump Administration's Trade Levies Raise Inflation Concerns and Bond Yields
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President Trump's trade levies are raising inflation concerns and impacting bond yields, with short-dated Treasuries seeing significant increases.
US President Donald Trump's recent decision to impose levies on key trading partners has heightened concerns regarding inflation risks. This move has resulted in an increase in yields on short-dated bonds, which are particularly responsive to changing rate expectations.
In particular, yields on benchmark two-year Treasuries rose by as much as seven basis points, reaching 4.27%. This marks the highest yield recorded since January 10. Additionally, overnight-indexed swaps now fully anticipate the first Federal Reserve interest rate cut to occur in September, a shift from previous expectations of a cut in July.
