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2025-09-17 18:01:08
Trump's Pressure Stirs Up the US Treasury Curve, Fund Managers Warn of Fiscal Concerns. (1) The US Treasury yield curve may steepen on Tuesday due to investor concerns about fiscal and political risks. Bond fund managers say Trump's continued pressure on the Federal Reserve is gradually eroding market confidence in the institution's authority. Long-term Treasury yields are facing the dual pressures of widening deficits and increased bond issuance, making it difficult for them to fall, while short-term yields reflect market expectations of more aggressive Fed rate cuts. (2) Specific data showed that the two-year Treasury yield fell to 3.51% on Tuesday, after previously rising to 3.578%. The 10-year yield was at 4.03%, having recently declined due to weak labor market data, reinforcing expectations of policy easing. Gareth Nicholson, Chief Investment Officer of Goldman Sachs Asset Management, predicts that if labor market weakness persists, the front-end yield could fall to the high 2% range, while the back-end yield would remain in the 3% to 4% range, leading to a moderate steepening of the curve in early 2026. The balance between monetary easing and supply dynamics will be the key factor. ⑶ Stephen Parker, co-head of global investment strategy at JPMorgan Private Bank, noted that investors are not yet adequately compensated for hedging against inflation and fiscal concerns, with the long-term U.S. Treasury curve being most sensitive to these risks. Morgan Stanley's Chief Investment Officer, Mike Wilson, believes that policymakers are likely to respond to pressure by suppressing yields, even if this could reignite inflation risks. Consequently, market participants are turning to other assets, such as equities, and that front-end yields are expected to decline in the short term due to short-term Treasury issuance, Treasury repurchase agreements, and Fed rhetoric. ⑷ As the appeal of U.S. Treasuries wanes, bond fund managers are optimistic about private credit filling the yield and diversification gap. Gareth Nicholson, Chief Investment Officer of Nomura International Wealth Management, emphasized that returns in private credit require patience, with opportunities concentrated in secondary markets, infrastructure, renewable energy, and logistics real estate. JPMorgan's Parker added that corporate fundamentals remain solid, and credit spreads are narrow only due to distortions in the U.S. Treasury market. His strategy favors holding income over long durations.
