U.S. Treasury yields fell on Monday as investors assessed President-elect Donald Trump’s pick for Treasury secretary and awaited key inflation data later in the week. The 10-year Treasury yield dropped more than 14 basis points to 4.265%, while the 2-year Treasury yield decreased by over 10 basis points, reaching 4.264%. One basis point equals 0.01%, and yields move inversely to prices.
Trump’s selection of hedge fund executive Scott Bessent as Treasury secretary helped ease investors’ concerns about the future of the U.S. economy. Bessent, the founder of Key Square Group, is expected to support Trump’s economic objectives, including gradual tariffs and pro-business policies. Given his background on Wall Street and as a fiscal conservative, investors believe Bessent will prioritize economic and market stability.
According to Kit Juckes, chief FX strategist at Societe Generale, Bessent’s nomination led to lower bond yields, higher equity indices, and a weaker dollar. Markets reacted positively to Bessent’s appointment, especially amid worries about the U.S. budget deficit and the potential inflationary effects of tariffs. While the impact of Bessent’s policies on achieving 3% GDP growth and a 3% budget deficit remains to be seen, his nomination has shifted the market sentiment for now.
Bessent emphasized his focus on avoiding inflation in an interview with CNBC before his nomination. He suggested implementing tariffs gradually to prevent any sudden spikes. In the coming days, investors will be closely monitoring various economic indicators as the trading week is shortened due to Thanksgiving.
On Tuesday, minutes from the Federal Reserve’s recent policy meeting will be released, along with the S&P CoreLogic Case-Shiller U.S. National Home Price Index for September. Wednesday will bring several economic updates, with a particular focus on the October personal spending and income report. This release includes the personal consumption expenditures (PCE) price index, which is the Fed’s preferred measure of inflation.
Economists are anticipating a 2.8% year-over-year increase in the core PCE price index, excluding volatile food and energy prices, and a 2.3% rise in the headline index over the previous 12 months. This final PCE release before the Fed’s December meeting will provide insights into the central bank’s potential policy decisions. Investors will be looking for clues regarding the Fed’s next steps based on the inflation data and economic updates.
