0954 GMT – The U.S. Treasury yield curve could flatten in the wake of President Trump’s weekend tariff announcements, say ING rates strategists in a note. A yield curve flattening means that the spread between short- and long-dated bond yields narrows. The impact from tariffs on U.S. rates is complex, they say. This is because tariffs can be interpreted as inflationary through higher consumer prices as well as deflationary from a growth perspective. The 10-year U.S. Treasury yield falls 2.5 basis points to 4.540% while the 2-year yield rises 2.5 basis points to 4.264%, according to Tradeweb. (emese.bartha@wsj.com)

Bonds Don’t Yet Reflect Concerns About Trump-Driven Inflation

0949 GMT – Concerns about a Donald Trump-driven surge in inflation—or potentially a fiscal crisis— haven’t yet manifested in bond prices​, says AXA Investment Managers’s Chris Iggo in a note. “Should yields rise, this will be a problem for equities, especially if it reflects a change in the market’s view on Fed​eral Reserve policy,” the chair of AXA IM Institute and CIO of AXA IM Core says. U.S. President Trump’s administration has moved ahead with plans to levy 25% tariffs on goods from Mexico and Canada plus an extra 10% tariffs on imports from China. Ten-year Treasury yields fall 3 basis points to 4.533%, according to Tradeweb. (emese.bartha@wsj.com)

Tariffs Could Boost Appetite for Safe Havens, Prompt Treasury Yield Fall

0928 GMT – U.S. Treasury yields could fall if demand for safe-haven assets increases due to uncertainty surrounding the impact of tariff policies, says DHF Capital S.A’s CEO Bas Kooijman in a note. The 10-year U.S. Treasury yield falls 1.5 basis points to 4.55%, according to LSEG. Talks between leaders of U.S., Mexico and Canada introduce the possibility of tariff reductions, however, which could soothe markets’ reaction if a compromise is reached, Kooijman says. (emese.bartha@wsj.com)

Eurozone Bond Outlook Remains Positive After Trump’s Tariff Announcement

0850 GMT – Positive sentiment towards eurozone bonds is holding after Trump went ahead with plans for tariffs on Canadian and Mexican goods and threatened a move against Europe, ING strategists say in a note. “Now that the pessimistic scenarios on trade appear to be unfolding, the bullish case for euro rates remains even more valid given the shock to risk sentiment.” A recent rate cut by the European Central Bank, poor GDP numbers and an undershoot of eurozone inflation numbers have all helped yields down further, while further reductions in interest rates look likely, they say. The 10-year German Bund yield falls 2.5 basis points to 2.433%, according to Tradeweb. (emese.bartha@wsj.com)

Any Weakness in 10-Year Bunds Seen as Buying Opportunity

0718 GMT – The 10-year German Bund yield seems to have established a range below 2.5%, and any weakness could be used to add to duration, says Commerzbank Research’s Rainer Guntermann. “We stick to a constructive duration stance in Bunds, and setbacks from U.S. headwinds or the uptick in euro area inflation should provide better buying opportunities,” the rates strategist says. Tariffs announced by the Trump administration don’t come as a major surprise but are a setback for risk sentiment, he says. U.S. Treasury yields decline, having reversed the initial weakness. The 10-year Treasury yield falls 3.5 basis points to 4.532%, while the 10-year Bund yield is little changed at 2.459%, according to LSEG. (emese.bartha@wsj.com)

U.S. Treasurys Might Not Be Best Place to Escape From Tariffs

0704 GMT – Higher volatility and elevated policy uncertainty will likely mean continued healthy demand for havens, but Treasurys might be hit by the inflationary impact of tariffs, Pepperstone’s Michael Brown says in a note. “Treasuries, given upside inflation risks, are probably not the best place to hide out here, while the FX space will continue to be roiled by trade headlines,” the senior research analyst says. That is likely to lead most participants toward gold, he says. U.S. President Trump’s administration moved to impose tariffs on goods from Mexico and Canada, plus an extra 10% tariff on imports from China. The 10-year U.S. Treasury yield declines 4.5 basis points to 4.521%, according to LSEG. (emese.bartha@wsj.com)

Sources: The Wall Street Journal

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