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Bond traders have no faith in long-term U.S. growth or inflation

Data: Investing.com; Chart: Axios Visuals

U.S. Treasury yields fell to their lowest level in about 10 weeks on Tuesday, as investors continue to buy safe-haven government debt even as the U.S. stock market rises.

Why it matters: While the S&P 500 has risen more than 11% so far this year, benchmark 10-year Treasury yields are back near their lowest levels of 2019. Despite those low yields, a Treasury auction of 10-year notes Tuesday saw especially strong demand.

  • Treasury yields had started to pick up after the delayed Q4 GDP report suggested prices could be picking up, but bond investors have lost faith and Tuesday's weak core CPI data (1.5% year-over-year and the first month-over-month reading below 0.2% in 6 months) closed the coffin on any further upward momentum.

The big picture: As we wrote last month, the bond market is showing that traders have no faith in long-term U.S. growth or inflation. Stocks are rallying based on expectations that the Fed will not raise interest rates, a theme that has been re-enforced by worsening global growth data.

  • John Herrmann, rates strategist at MUFG Securities Americas, tells Reuters that his bank's models suggested the Fed will hold rates through this summer and then shift to an easing monetary policy stance at its September meeting.