THE FISCAL FOG MIGHT BE LIFTING FOR US TREASURIES
According to the current market narrative, ultra-long U.S. Treasury yields could be headed higher, mostly because investors are getting nervous about the long-term outlook for U.S. sovereign debt.
However, some investors argue the mood has been shifting since early April, when the U.S. tariff announcement sent 10-year yields climbing above 4.5% and 30-year yields past 5% in just a few weeks.
“Despite widespread worries following the passage of the One Big Beautiful Bill Act (OBBBA), the U.S. Treasury market has been notably resilient,” Barclays analysts say.
“A combination of higher tariff revenues and lower issuance-weighted Treasury yields has materially improved the debt outlook,” they add.
Current fiscal and monetary policy outlooks suggest budget deficits are likely to dip to 5.5-6.0% of GDP, while many had expected a rise to 7-8%, according to Barclays.
The 10-year forward…
