Trump Demands Rate Cuts as Inflation Cools and Yields Drop 📉

US bond yields are seeing their fourth consecutive session of declines today, erasing early June gains and testing their lowest levels since early May. The 10-year Treasury yield is falling to around 4.36% today, breaking below the 4.4% mark.

Several factors are driving the rise in US bond prices, though these influences aren't yet strong enough to trigger sharp movements. Primarily, this week's inflation reading came in lower than anticipated, somewhat weakening the negative scenario of inflation strengthening due to tariffs imposed by President Trump. While the clearer impact of tariffs on price changes will likely unfold over the coming months, the May data can be seen as a prelude. In this instance, it suggests a slightly weaker impact on price growth than expected, which could remove another argument for the Federal Reserve to further delay interest rate cuts.

Bond yields remain at elevated levels (since the beginning of June, 10-year yields stayed above their 100-session moving average) might have presented an attractive valuation for debt securities to some investors. Source: Bloomberg Finance L.P. 

As a result, Donald Trump has once again criticized Federal Reserve Chair Jerome Powell for maintaining current interest rates. According to the former president, a two-point rate cut could save the U.S. government $600 billion annually in interest payments—a substantial sum that could aid the administration’s efforts to fulfill its promises of reducing national debt.

The comeback of Trump-induced pressure stems from the last two days of lower-than-expected inflation readings. So far, the price dynamics haven’t shown signs of upward pressures feared by various Fed members due to the changes to US trade policy. Although both CPI and PPI persist above the 2-percent target, investors have already ramped up their bets on monetary easing in the US, as reflected in recent drop in the US Treasury yields. The rising expectations are also visible in the money market, where chances of a potential September cut are currently priced slightly above 70%, compared with last week’s 69%.

Another factor pushing bond prices higher is the increasing demand for "safe haven" assets. Tensions in the Middle East and the US announcement about withdrawing some staff from the Iraqi embassy due to an "increased threat in the region" are fueling investor concerns. In such times, capital seeks safer alternatives than highly volatile assets.

The TNOTE contract has drawn back after hitting key resistence around 110-112 mark. Source: xStation5