US Fixed Income—Yield Shift: What’s Moving the Treasury Market?

U.S. Treasury yields moved notably higher in recent weeks, with the 10-year bond yield hovering above 4.5% after yields decreased from 4.58% in May. The yield swings were due to factors such as inflationary concerns, mixed labor data, and the growing uncertainty surrounding the U.S. federal debt level. The May 22 jobless claims report decreased from the prior week, which hinted that the labor market remains robust despite elevated interest rates. The May 29 and June 5 jobless claim data, however, painted a different picture. There was an uptick of nearly 20,000 jobless claims from May 22 to June 5—which signaled to investors that a slowdown looms in the distance—driving yields above 4.5%.

Adding to this, market volatility was amplified by uncertainty surrounding the current debt levels and fears that the levels may increase. The combination of tariff policies, inflation pressures, political risk, and the downgrade in the U.S. credit rating has led to the repricing of fixed-income instruments. Investors are anxiously waiting for the release of the Consumer Price Index (CPI) data as it may provide critical insight into inflation trends and set the tone ahead of the Fed’s upcoming meeting. All eyes are on the Fed, as investors wonder, will the Fed, pump the breaks or hit the gas?