President Donald Trump’s economic agenda has caused investors to reassess their expectations for interest rates, leading to a surge in bond yields. The 10-year Treasury yield briefly rose above 4.8% in January, its highest level since November 2023, before dropping below 4.25%. Experts believe this rally reflects concerns that Trump’s tariff threats and economic policies may lead to higher inflation.
However, softer economic data has led investors to consider the possibility of a global trade war and lower rates on the horizon. The Federal Reserve’s preferred inflation metric fell slightly from the previous month, and experts say the economy is moderating. Jay Hatfield, CEO of Infrastructure Capital Advisors, believes the Fed has been keeping monetary policy too tight, while Jason Bloom, head of fixed income ETF strategy at Invesco, notes that uncertainty about Trump’s policies has put a pause on economic activity.
The market’s optimism about rate cuts may be premature, as consumer expectations of inflation have surged. Bloomberg says it’s likely that the 10-year yield is at its bottom, but this contradicts Trump’s goal of lowering borrowing costs for Americans. The situation highlights the tension between the new administration’s desire to boost economic growth and the need to control inflation.
Experts say the bond market rally reflects a sense that signs of weakness in the economy will give the Fed room to cut rates. However, the impact of Trump’s policies on the economy is still uncertain, and investors are waiting for more clarity before making big bets. As one expert notes, “It’s always going to be very dependent upon what the economy does.”
Source: https://fortune.com/2025/02/28/donald-trump-interest-rates-yields-growth