Safe haven concerns mount as US Treasuries face twin recession and inflation risks - Reuters poll

Sarupya Ganguly

Tue, May 13, 2025, 4:56 AM 4 min read

By Sarupya Ganguly

BENGALURU (Reuters) - Concerns for the harmless haven presumption of U.S. Treasuries are rising with benchmark 10-year yields expected to drift sideways implicit the coming year, pinned betwixt commercialized war-driven recession and inflation, according to a Reuters canvass of enslaved strategists.

Since U.S. President Donald Trump’s April 2 reciprocal tariff announcement, the 10-year Treasury output has whipsawed successful a 75-basis-point range, plunging to a six-month debased and past rebounding to a two-month precocious wrong a week, driving a cardinal enslaved volatility scale to an 18-month high.

Battered capitalist sentiment has lone partially recovered since an earlier 90-day tariff reprieve and a U.S.-China commercialized truce announced connected Monday. Interest complaint futures are present pricing 2 Federal Reserve complaint cuts this twelvemonth compared to 3 conscionable a fewer days ago.

Over 54% of enslaved strategists, 19 of 35, successful a May 8-13 Reuters survey said they were acrophobic astir the accepted harmless haven presumption of U.S. Treasuries, which supply the benchmark for pricing successful planetary superior markets.

That was up from astir 47% successful an April poll, and successful enactment with the over-55% of FX strategists who expressed akin worries astir the U.S. dollar a week ago.

"I judge the entreaty of Treasuries arsenic a harmless haven has eroded owed to 2 cardinal factors: the imaginable for a important summation successful proviso and the (Trump) administration’s tariff policies," said Jabaz Mathai, caput of G10 rates and FX astatine Citi.

"Right now, tariffs are the ascendant driver, but arsenic we determination done the remainder of the year, fiscal argumentation volition besides travel into play," helium said.

"If the medication manages to propulsion done taxation cuts — and not conscionable extensions of the 2017 cuts, but besides different promises similar eliminating taxes connected Social Security benefits, tips and perchance lowering firm taxes — that could further unsettle investors."

U.S. indebtedness presently stands astatine $36.2 trillion, according to the Treasury Department.

"Investors are much disquieted present astir the semipermanent fiscal situation. It doesn't look similar they person a program to wage what they beryllium oregon astatine slightest support the fiscal shortage from increasing," said Lars Mouland, main rates strategist astatine Nordea.

Despite contracting past 4th connected a record-high commercialized shortage driven by businesses scrambling to get up of tariff hikes, the world's largest system is chugging along, leaving policymakers successful nary hurry to easiness rates, caller authoritative information suggest.

But sagging capitalist and user sentiment has markets betting connected an economical slowdown.