Fixed income

The selloff in US equities accelerated Monday, with major averages tumbling to their worst day this year, as investors braced for a slowdown in the American economy.

The advances pushed the yield on three- to 10-year yields lower by 10 basis points on Monday, with the moves accelerating as US equities sold off.

Traders added to bets on interest-rate cuts from the Federal Reserve amid concern about the impact of US trade tariffs on global economic growth. 

Treasuries gained for a sixth straight session. Morgan Stanley say the 10-year has scope to fall back below 4% if the prevailing view on the Fed shifts.

"Red flags are emerging for the US economy," said Elias Haddad, senior market strategist at Brown Brothers Harriman. "Another month or two of poor US economic data would deliver a blow to the US exceptionalism narrative."

The confabs are a sign that Republicans are getting serious about negotiating the contours of a tax deal, even as the House and Senate are pursuing separate strategies.

Bond traders anticipate that yields will remain elevated — and range bound — until there's a lot more clarity on where the economy is heading. 

Treasury Secretary Scott Bessent said the Trump administration's focus with regard to bringing down borrowing costs is 10-year Treasury yields, rather than the Federal Reserve's benchmark short-term interest rate.

After repeatedly blasting Janet Yellen last year over her department's strategy for issuing federal debt, it's now up to Scott Bessent to make the call on sales of Treasuries, with bond dealers conflicted over what he'll do in a pivotal release due Wednesday.

For those unsettled by the relentless rise in government bond yields in the US and across much of the world lately, the message from markets is getting clearer by the day: Get used to it.