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(Bloomberg) -- Investors are bracing for further weakness in the US Treasury market as they bank on President Donald Trump’s tariff threats becoming reality, the Bloomberg Markets Live Pulse survey showed.
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Persistent trade worries could push the benchmark 10-year yield to 4.80% in the next six months, putting it on the high end of a trading range traversed over the last several years, according to the median estimate of 153 respondents. Over that time frame, more than half of participants expect the US to place tariffs on at least some economies. More than a third expect universal levies to be enacted as well.
Yields fell to around 4.53% on Thursday.
Whatever shape a trade war takes, most investors see it as a potentially unwelcome development for the $29 trillion Treasury market. Backed by the US government, Treasuries have historically been a popular haven for investors in tumultuous times.
But tariffs are adding to worries over persistent US inflation, which have spurred bets that the Federal Reserve will refrain from cutting rates anytime soon, keeping yields elevated and pressuring bond prices. Concerns over US fiscal health have also dogged the asset class in recent years.
Elevated yields, meanwhile, have also caught Trump’s attention. Treasury Secretary Scott Bessent said earlier this month that the Trump administration’s focus with regard to bringing down borrowing costs is 10-year Treasury yields, rather than the Fed’s benchmark short-term interest rate.
Why the 10-Year Treasury Yield Is on Bessent’s Mind: QuickTake
Going for Gold
Tariff headlines have done little to derail the rally in US stocks this year, with the S&P 500 up nearly 4% year-to-date and within striking distance of a record high.
Should volatility hit in the near term, however, some market participants may be hesitant to reach for government bonds. Only 22% of investors surveyed named Treasuries as their preferred haven over the next month. Gold was by far the most popular choice, with 49% of investors naming it as their top destination if markets turn rocky.
“Inflation is coming back,” said Tracy Chen, portfolio manager at Brandywine Global Investment Management, adding that she’s staying in shorter-maturity bonds and avoiding interest-rate risks. “This will reinforce that the Fed will be on hold for the foreseeable future. The chance of a rate hike is going higher, depending on how the tariffs pan out.”