LIVE MARKETS-Will the Treasury rally last? It depends on tariffs and Trump

ReutersJan 16, 2025 5:03 PM

S&P 500, Dow edge green, Nasdaq modestly lower

Utilities lead S&P sector gainers; Cons Disc off most

Euro STOXX 600 index up ~0.9%

Dollar, bitcoin slip; crude down ~2%; gold up ~1%

U.S. 10-Year Treasury yield dips to ~4.62%

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WILL THE TREASURY RALLY LAST? IT DEPENDS ON TARIFFS AND TRUMP

U.S. Treasury yields tumbled on Wednesday after December’s consumer price inflation report eased concerns that inflation was re-accelerating. With President-elect Donald Trump set to take office next week, the next market move will depend on policy announcements.

“It is too soon to suggest that the initial post-CPI drop in yields has much further room to run until we’re through next week’s Trump inauguration and the trade/immigration policy announcements that are certain to follow,” BMO Capital Markets analysts Ian Lyngen and Vail Hartman said in a report.

In particular, the outlook for rates will depend on whether Trump follows through on pledges to place 20% tariffs on Mexico and Canada, alongside an increase in tariffs on China, BMO notes.

And “perhaps more importantly is the extent to which the US rates market has already gotten in front of such revelations,” the analysts said.

“With 10-year yields at 4.65% this morning, has the 105 bp selloff since the Fed’s first cut fully priced in Trump’s economic agenda, or is there another leg in the selloff yet to be realized?,” BMO asked, noting this is currently the most debated topic in the market.

(Karen Brettell)

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