Chart of the day: TNOTE (22.05.2025)

The U.S. debt market just had one of its worst sessions this year, and weak demand at yesterday’s bond auction intensified the trend of selling off all types of American assets. The lack of appetite for U.S. debt highlights concerns over Trump’s proposed tax bill and the long-term trajectory of an already bloated deficit.

The 10-year Treasury futures contract fell below the key support level of around 109.70, reaching its lowest point in three months. Bonds had been gradually rising in price amid expectations of Federal Reserve rate cuts, but the trade policy chaos in March and April has significantly dampened those hopes. Source: xStation5

“Sell America” Still in Play

Just days after the U.S. credit rating downgrade, the bond market has shown the administration a yellow card. Ongoing disputes over Trump’s tax legislation and stagflation fears have pushed 30-year Treasury yields above 5% (10-years nearing 4.6%). Weak demand for the latest 20-year bond auction also spilled across Wall Street, reinforcing the “Sell America” sentiment, with major blue-chip indices falling between 1.4% and 1.9%.

Bond yields continue to climb alongside recession concerns. 30-year yields have surpassed the symbolic 5% mark, approaching a 20-year high (the last peak was in fall 2023). Source: Bloomberg Finance L.P.

Republicans Divided

Trump’s proposed “beautiful tax bill” has been stirring controversy for days—on both Capitol Hill and Wall Street. It builds on the tax cuts introduced during his first term. The resulting drop in federal revenues is meant to be offset by budget cuts (including to Medicaid and green energy programs), but in its current form, the bill would further deepen the already substantial deficit. Adding to the challenge is the internal divide among Republicans: ultraconservatives are demanding deeper cuts, while moderates are voicing concerns over the future of infrastructure and energy projects.