US Yields have been on the rise, with the 10-year yield reaching a one-month high and nearing 4.50% on July 2, 2024. Meanwhile, Dollar index up 0.15% at 106.00. When US yields rise, it makes US Treasury bonds more attractive to investors, increasing the demand for the dollar and thus strengthening the dollar index.
This increase is US Yield attributed to several factors:
- Investors are cautious due to the upcoming election in November, with concerns about the potential impact of different outcomes.
- The French elections are also adding to investor uncertainty, leading to a flight to safety in US Treasuries.
- Some investors are betting that former President Donald Trump may defeat President Joe Biden in the upcoming election, which could lead to policy changes and market volatility.
- The rise in yields has also impacted Indian government bonds, which have remained largely unchanged despite the global trend.
Overall, the rising US yields are a significant factor in the recent strengthening of the dollar index. As long as yields continue to rise, the dollar index is likely to remain strong.
US Treasury yields fluctuated throughout May and June 2024, influenced by various economic and political factors:
US Treasury yields May 2024:
- The 10-year Treasury yield started May around 4.63% and experienced a gradual decline, reaching 4.2% by mid-June.
- This decrease was primarily due to easing inflation concerns and indications of a potential slowdown in the US Federal Reserve’s interest rate hikes.
- However, yields remained above the “fair-value” estimate of the Capital Spectator model, suggesting a premium valuation.
US Treasury yields June 2024:
- The 10-year Treasury yield saw a rebound in the second half of June, rising back towards the 4.5% mark.
- This increase was attributed to renewed inflation worries, hawkish comments from Fed officials, and global economic uncertainties.
- The yield curve inverted, with shorter-term yields exceeding longer-term yields, reflecting concerns about a potential economic downturn.
Overall, the US Treasury market experienced significant volatility in May and June 2024 due to changing market sentiment and evolving economic conditions. Investors remained cautious amid ongoing uncertainty surrounding inflation, interest rates, and geopolitical developments.