The US 10-year yield will likely maintain its 4% floor despite economic headwinds – GlobalData TS Lombard

[Bond market, trading screen with a falling chart of a 10 year US bond, symbolic for rising yields.]
Torsten Asmus

The U.S. 10-year bond yield (US10Y [https://seekingalpha.com/symbol/US10Y]) may have found its floor at 4%, with limited room for further decline despite growing signs of economic slowdown, said Daniel von Ahlen, senior macro strategist at GlobalData TS Lombard, in a note.

According to the strategist, “The U.S. 10-year bond term premium has remained broadly stable of late,” even as significant macro headwinds including tariffs, immigration crackdown, and uncertainty loom over the American economy.

President Donald Trump’s decision to halt U.S. military involvement in the Middle East and his efforts to secure a ceasefire between Iran and Israel have reduced tail risks associated with the Strait of Hormuz, he said.

“A weakened Iranian military position means a safer Middle East, and this bodes well for GCC credit,” the strategist indicated, recommending investors go long on GCC sovereign bonds (PCY [https://seekingalpha.com/symbol/PCY]) versus US investment-grade corporate bonds (LQD [https://seekingalpha.com/symbol/LQD]) as relative spreads are expected to narrow.

Also, the U.S. dollar’s (DXY [https://seekingalpha.com/symbol/DXY]) decline may continue, which emphasizes that recent gains were erased following Trump’s de-escalation strategy.

“With the haven attribute of the dollar significantly diminished owing to the recent trends in U.S. governance and institutions, we struggle to see an end to the dollar’s malaise at the current juncture,” von Ahlen said, challenging the traditional safe-haven status of the U.S. currency.

Market expectations have already priced in a terminal rate of 3% for the Federal Reserve by the end of next year, limiting the potential for lower yields. GlobalData TS Lombard analysts pointed out that “barring recession, it [the term premium] is poised to stay elevated” due to reduced deflation risk, tepid hedging properties of bonds amid geopolitical uncertainty, and ongoing fiscal concerns that are “unlikely to dissipate anytime soon.”

Several factors continue to weigh against the dollar, including Net International Investment Position themes and global growth rebalancing outside the U.S.

“If the nascent trend in weaker U.S. hard data persists, we would expect the dollar to hit new lows as valuations aren’t cheap, despite the strong decline of the dollar index year-to-date,” von Ahlen concluded, noting that even if the Fed’s terminal rate pricing could eventually lead to renewed USD strength, this impact may be delayed as “the catalyst that could see markets trim rate cut bets isn’t clear right now.”

Investors can follow bond ETFs, here [https://seekingalpha.com/etfs-and-funds/etf-tables/bonds].

MORE ON UNITED STATES 10-YEAR BOND YIELD:

* June 2025 Commentary And Economic Outlook [https://seekingalpha.com/article/4796640-june-2025-commentary-economic-outlook]
* Iran Stuck By U.S.: Markets, Risk, And Rational Investing [https://seekingalpha.com/article/4796542-iran-stuck-by-us-markets-risk-and-rational-investing]
* In The Eye Of The Bond Market Hurricane? [https://seekingalpha.com/article/4796494-in-the-eye-of-the-bond-market-hurricane]
* Mnuchin expects Fed to cut rates by 75-100 bps over the next year [https://seekingalpha.com/news/4461776-mnuchin-expects-fed-to-cut-rates-by-75minus-100-bps-over-the-next-year]
* Treasury yields mixed after Fed still sees policy easing this year, but in no rush to cut [https://seekingalpha.com/news/4459629-treasury-yields-mixed-after-fed-still-sees-policy-easing-this-year-but-in-no-rush-to-cut]