Bond Market in Step With Fed Is About to Slam Into US Election
- Treasuries enter second half of year having recouped losses
- Rate cuts, election risks seen jolting yields toward normal
It took much of the first half of the year for Treasury bond investors to fall in line with a Federal Reserve signaling higher-for-longer interest rates. Now, as they weigh the timing of a second-half pivot, they must also contend with potential wild-card risks from a hotly contested presidential race.
The US bond market has clawed its way close to breakeven, thanks to two straight months of gains that have left the benchmark Treasury index down just 0.15% for 2024 as July beckons. With traders focused on every data point, extending the current run — Treasuries haven’t been able to eke out more than two consecutive months of gains since 2021 — will require sustained evidence of a slowing economy and softer inflation that would increase the chance of a rate cut as soon as September.