Looming uncertainty raises concerns about US Treasury demand
US Treasury (^TNX, ^TYX, ^FVX) rates are in focus as tariff worries and policy uncertainty weigh on the US's position in the global fixed income market.
Amid concerns that the US Treasury may not have sufficient demand to bring an auction to market, Principal Asset Management's chief investment officer of global fixed income, Michael Goosay, tells Brad Smith and Madison Mills on Morning Brief that these worries are probably overblown, though uncertainty persists.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
It's time now for today's strategy session. The bond market under pressure following the latest jobs report, which showed strength in the labor market, shifting investor expectations for rate cuts this year. The moves come ahead of an auction this week for 30-year bonds that will test demand for long-dated treasuries. Joining us now, we've got Michael Goosie, who is the Principal Asset Management chief investment officer of Global Fixed Income here. Michael, good to see you once again. Thanks for joining this morning. First, as you're thinking about what this auction could really spell out about where investors have appetite for duration, what are your anticipations?
Yeah, good morning. Thanks for having me. Uh certainly the uh the auction, as you noted, is one that's going to bring a lot of questions into where is the demand at this point. The long end of the curve traditionally is a place where pension plans, insurance companies tend to uh really dominate the flows. Uh more recently, as rates have been higher, you've seen foreign investor demands really create um, you know, some successful auctions for the Treasury. Um with some uncertainty about how tariffs are playing out and and how the US's uh role in world order uh continues to unfold, uh there is some concern that we could see some auctions not gaining enough demand in order to uh meet what the Treasury needs to to to bring to the market.
How likely do you think that is, Michael?
So, I think it's probably overstated, but the term premium still isn't significant enough to really attract investor demand to the long end of the curve. And, you know, you do have the uncertainty about how tariffs will result in inflationary pressures, how that affects the Fed is is is all stuff that is is creating uncertainty, and uncertainty pushes investors to to stay at home. And at this point, um we think that there still is enough demand, there still is attractive enough yield levels from a historical perspective, uh for investors to participate in these auctions and to be buyers of the bond market. Um but there is enough uncertainty out there that the future could be a little different.
