US Treasury Department Issues Quarterly Refunding Statement Amid Yield Uncertainty
The US Treasury Department released its quarterly refunding statement, confirming steady auction sizes for upcoming quarters. This led to a decline in Treasury yields, with 10-year yields around 4.5% and 2-year yields at 4.28%.
Historical trends show that higher yields typically correlate with lower stock prices. However, in 2023, both yields and US equities increased, with the S&P 500 significantly gaining in Q4 when the 10-year yield fell by 0.5%.
The current outlook for Treasury yields remains uncertain due to several factors:
- The Federal Reserve's pause on interest rate cuts
- Persistent inflation
- Global trade tensions
- Potentially higher tariffs on US imports
- New Treasury leadership under Secretary Scott Bessent, who favors long-term funding over short-term bills
The future of stocks could be impacted if yields rise significantly, raising recession fears.