This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Summary
- Roughly seven weeks into 2025, and the US treasury (UST) market has already established decent, tradable year-to-date (YTD) ranges.
- For 2-year, 10-year and 30-year UST yields, trade has been choppy but should now churn around within the YTD ranges into March.
- With tariffs set to start next month (or, for Canada and Mexico, additional tariffs to be reviewed), markets will engage in a waiting game until then.
Market Implications
- We stand aside in USTs, waiting for further clarity into end-Q1. Next month, the tariff realities should be clearer.
Trump Tariff Flurry Has Left Markets in Wait-and-See Mode
So far, 2025 has been a lively year for financial markets. The UST market is no exception.
The market has been laser-focussed on the various Trump trades – higher inflation, higher UST yields, strong USD, stronger US equities – throughout late 2024 and into this year.
One of the key Trump trades, higher UST yields, has not really happened. Price action has been volatile, and yields have tried to push significantly higher, but we now find ourselves within 4bp-6bp of levels seen at the end of 2024 across the UST curve.
A big driver of price action and volatility has been Trump’s tariff policies. The president has imposed tariffs on US and Canada (now delayed to next month), a 25% across-the-board tariff on steel and aluminium (also set to start next month), and reciprocal tariffs against all trade partners (to begin on 1 April).
Given the deferred timetables for these tariffs, we think USTs will now trade choppily within the established YTD ranges.
As throughout late 2024 and into this year, noise will persist. But the YTD ranges will contain UST moves into next month (when we will get further clarity on tariffs).
2-Year UST
Since the year began, the 2-year UST yield has traded within a ~20bp range, with the peak closing level (4.38%) printing on 13 January, and the lowest closing level (4.18%) occurring last week, on 5 February (Chart 1).
10-Year UST
Since the turn of the year, the 10-year UST yield has traded within a ~40bp range, with the peak closing level (4.79%) printing on 14 January, and the lowest closing level (4.42%) occurring last week, on 5 February (Chart 2).
30-Year UST
Over the same period, the 30-year UST yield has traded within a ~40bp range, with the peak closing level (4.97%) printing on 14 January, and the lowest closing level (4.63%) occurring last week, on 5 February (Chart 3).
UST Technicals Are Neutral Across the Curve
In this week’s US Rates Technical Report (USRTR), we saw that the RSI readings for UST futures contracts across the curve were neutral (Chart 4).
The RSIs are clustered very near the middle of the oversold (30) and overbought (70) range, which we think strengthens the case that UST prices will be rangebound in the coming weeks.
Tariffs Hold the Key to the Next Big Moves
As we wrote last week, even with the delayed implementation of tariffs, US levies on imports are here to stay, and will continue to be the key driver of price action in markets.
Given that we will not know more about the tariffs until they are implemented from next month, we think that all markets, including USTs, will trade in the coming weeks within their established 2025 ranges.
There will be more clarity in a few weeks’ time. Until then, we prefer to be cautious and respect the YTD ranges.