(Bloomberg) -- Treasuries pared gains as the global stocks selloff showed signs of easing, with investors turning their attention to a wave of important reports on the health of the American economy.
The rate on US 10-year bonds rose two basis points to 4.23% after falling as much as six basis points earlier. Markets are looking ahead to data on US job openings and layoffs, as well as inflation, to see if the slowing economy necessitates further interest-rate cuts by the Federal Reserve.
Equity markets steadied on Tuesday, giving investors some respite after concern President Donald Trump’s policies may send the economy into a recession saw the Nasdaq 100 post its worst drop since October 2022 on Monday, and sent investors scurrying for sovereign debt.
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Investors will get an update on the US labor market later on Tuesday, to be followed by consumer price data on Wednesday, which is expected to show inflation decelerated in February. Markets are also awaiting remarks from Trump, who will address business leaders at a gathering scheduled for 5 p.m. in Washington.
Over the weekend, Trump said the economy faces “a period of transition,” when asked if he expected a recession this year. That followed Bessent’s remarks on Friday that there could be “a detox period” as the market and economy have become addicted to government spending.
Trump and Bessent “are implicitly acknowledging they will accept near-term economic pain,” said Stephen Spratt, a rates strategist at Societe Generale SA in Hong Kong. “With inflation more contained, Treasuries are back front and center as the preferred risk hedge.”
Fed Chair Jerome Powell on Friday acknowledged increased uncertainty in the US economic outlook, but said officials don’t need to rush to adjust policy. Traders have been adding to bets on more easing, and are now fully pricing three quarter-point reductions this year, compared with less than two reductions seen at the start of this month.
Unpredictable tariff policies are also spurring risk aversion. Trump imposed 25% tariffs on most Canadian and Mexican products this month only to delay full implementation as stocks plunged. Actions taken by the Department of Government Efficiency to reduce federal head counts have also left thousands of government employees and contractors out of work, which could add to growth headwinds.
“Tariff fears will continue to see US Treasuries reflect growth consequences rather than inflation risks,” Damien McColough, head of fixed-income research at Westpac Banking Corp., wrote in a note.
(Updates moves throughout.)
