[New York Bonds] US Treasury yields mixed... Bond market dulled by 'Trump noise'

Source: BlockMedia Original Title: [New York Bonds] U.S. Treasury Yields Mixed… Bond Market Damped by ‘Trump Noise’ Original Link: On the 22nd(local time), the New York bond market resumed its flattening(flattening) trend, with the yield spread between short- and long-term bonds narrowing again despite easing geopolitical risks. Although President Trump withdrew plans for military intervention in Greenland and tariffs on Europe the previous day, seemingly resolving the market’s biggest uncertainties, bond investors remain cautious about the potential for political re-escalation.

The yield on the 10-year U.S. Treasury note rose by 0.002 percentage points to 4.249%, showing little change from the previous day. It briefly climbed into the 4.26% range during the day but retreated in the afternoon, stabilizing. Meanwhile, the 30-year yield fell by 2.2 basis points to 4.848%, and the 2-year yield rose by 1.5 basis points to 3.612%, resulting in the yield curve narrowing from 65.4bp to 63.7bp.

Despite Geopolitical Easing, ‘Re-escalation Caution’ Maintains Flattening Trend

President Trump claimed that, following negotiations with NATO(NATO), the U.S. secured “permanent and comprehensive access” to Greenland, emphasizing diplomatic progress. While recent tariff risks and military intervention concerns that had weighed heavily on the bond market have eased, investors remain wary of the possibility of a sudden reversal.

Tony Rodriguez Nubin, Head of Bond Strategy, commented, “This incident is seen as a temporary easing, but it also heightened market vigilance that it could flare up again at any time,” adding, “Geopolitical risks rooted in policy have become a constant in the bond market.”

The November personal consumption expenditures(PCE) price index released today showed both core and headline figures rising 2.8% year-over-year, in line with expectations. The month-over-month increase was 0.2%, unchanged from the previous month. While consumer conditions remain solid, inflation pressures have not intensified significantly, leading markets to lean toward the Federal Reserve(Fed) possibly maintaining interest rates at the January meeting.

Market participants are still pricing in the possibility of three rate cuts within the year, and the latest PCE data did not significantly alter expectations for monetary policy.

The $10 billion 10-year TIPS(Treasury Inflation-Protected Securities) auction conducted today showed somewhat weak results. The yield was 1.94%, slightly above market expectations, and the bid-to-cover ratio, indicating the ratio of bids to accepted bids, was 2.38, lower than usual. This suggests investors are somewhat less attracted to TIPS as an inflation hedge.

Following the auction, the real yield on the 10-year TIPS rose slightly to around 1.876%.

The weekly initial jobless claims released today increased by 1,000 to 200,000, below market expectations(210,000), and the Q3 GDP was revised upward to an annualized 4.4%, reaffirming the resilience of the U.S. economy. However, bond markets reacted little to these data, showing greater sensitivity to policy variables and supply-demand flows.

John Flav, Head of Investment Insights at Insight Investment, commented, “The current market focuses more on how policies might change rather than whether economic indicators are good or bad,” and noted, “Unexpected triggers like the Greenland issue tend to have a stronger impact on the yield curve.”

The narrowing of the short- and long-term yield spread today reflects the market’s perception that the tariff withdrawal might be a one-off measure. The 2-10 year spread, which had exceeded 70bp yesterday, narrowed to 63.7bp today. This indicates that short-term interest rate expectations remain relatively low, and the market’s inflation sensitivity remains limited.