Fresh supply weighed on bonds this week, pushing up Treasury yields. The latest leg came after a soft 30-year auction yesterday but attention may also be turning to politics.
Trump this week touted a corporate tax cut but what's far from clear is how it will be paid for. Tariffs continue to be on the table but could only conceivably cover a fraction of the cost while also boosting inflation and inviting retaliation. Those are all moves that could keep Fed rates higher.
Seasonally, December is usually a good month for bonds and it started out that way this year but it's turned lately. Eyes will now be on 4.50% in 10s as we head into next week's FOMC decision. A rate cut is 94% priced in but the intrigue will be on signals about what comes in 2025, with just two further cuts priced in for the year.
I wouldn't expect any strong signal but the Fed's dot plot will reveal a bias and we could also get enlightening comments from officials about how they see inflation unfolding.
