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Bond yields rose for a third session, lifting the 10-year to about 4.09% after crude initially climbed on reports of a possible near-term U.S. military move tied to Iran, reviving inflation fears. Markets then saw heightened intraday volatility — diplomatic signals and technical selling swung energy and risk assets both ways — underscoring near-term uncertainty for Treasuries and a structural upside risk to long yields.

Federal Reserve staff signaled worry about elevated equity valuations and concentration in a few large tech firms even as corporate-debt vulnerabilities remain moderate. Heavy borrowing by technology companies — driven by AI capital needs — is boosting corporate bond supply and could push yields higher, competing with Treasury issuance.

Tether reported roughly $10 billion in net profit for 2025, down about 23% from 2024, while boosting direct U.S. Treasury holdings to more than $122 billion and issuing roughly $50 billion of new USDT over the prior 12 months. The issuer also intensified purchases of physical gold—at a pace the company says can reach about two tonnes per week, pushing inventories toward the low hundreds of tonnes—and is pursuing an onshore, federally chartered product (USAT) issued via Anchorage Digital Bank to target U.S. institutional markets.
Large asset managers are rebalancing after market signals point to rising inflation risk and higher long-term yields. Moves include shorting long-duration sovereign debt, buying selective inflation-linked securities, and tilting toward cyclically exposed equities while also monitoring FX and alternative inflation gauges.

Federal actions — including a Fed leadership signal toward easing and a presidential order for Fannie Mae and Freddie Mac to buy roughly $200 billion of mortgage bonds — may shave a few basis points from borrowing costs. But a prior round of easing, a Fed policy pause, the Treasury yield outlook and persistent housing supply shortages suggest any drop in mortgage rates will be modest and uneven.
Derivatives markets are pricing no change at this week’s Federal Reserve policy decision while shifting the timing of the first 2026 rate reduction from June into July. The dollar has weakened alongside those expectations, and investors are recalibrating positioning ahead of leadership uncertainty at the Fed when the chair’s term expires in May.

Kevin Warsh’s nomination has pushed markets and policymakers to focus less on the timing of rate cuts and more on how large and active the Fed’s balance sheet should be — a debate that intersects with Treasury financing, money‑market liquidity and confirmation risks tied to a Justice Department inquiry. Even pledges to trim the Fed’s footprint would require careful operational choices and political buy‑in to avoid destabilizing short‑term funding and raising long‑term borrowing costs.

Goldman Sachs forecasts the UK 10-year gilt yield will decline to 4% by the end of 2026, a drop of about 40 basis points, driven by easing inflation and anticipated Bank of England rate cuts. The bank says this will bring government borrowing costs to their lowest point since 2024, with mixed implications for public finances and fixed-income investors.