US bonds in turmoil - what’s really at play?
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The U.S. bond market is facing volatility with a 60-basis-point increase in 10-year Treasury yields since the FOMC meeting on September 18, 2024; driven by strong macroeconomic data, commodity price inflation from Chinese stimulus, and Fed officials advocating a higher terminal rate; political uncertainties, particularly a potential Republican sweep in the upcoming elections, are adding pressure; the terminal rate has been revalued from 2.7% to 3.4%, with Atlanta Fed President Raphael Bostic estimating a neutral rate of 3.0–3.5%; breakeven rates rose from 2.05% to 2.32%, nearing 2024 highs; the term premium has turned positive, rising by 50 basis points; the MOVE index for bond market volatility reached a one-year high on October 7; if the Fed cuts rates by 50 basis points by the end of 2024, a yield curve steepening of about 70 basis points is expected; a Trump presidency could lead to aggressive fiscal expansion, increasing inflation risks and limiting deep rate cuts; potential stabilizing factors include a divided government or weaker macroeconomic data; the bond market remains steady but fragile, with caution advised on long-term rates.

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https://ifamagazine.com/us-bonds-in-turmoil-whats-really-at-play/