Treasurys began June on the back foot with 30-year bond yields testing the 5% level as concerns over President Donald Trump’s tariff policies resurfaced at the start of a data-heavy week for assessing the health of the world’s largest economy.
Benchmark yields were trading four to seven basis points higher across the curve and yields resumed climbing after a brief pullback in response to weaker-than-expected U.S. ISM manufacturing data for May that was accompanied by higher prices paid. The ISM remains in contraction territory below 50.
Following their first monthly decline of 2025 in May as measured by a Bloomberg index, U.S. Treasurys — particularly longer-dated maturities — continue to face pressure amid persistent concerns over the nation’s fiscal outlook.
Longer-dated bonds led Monday’s declines, driving yields on 10-year debt up more than 6 basis points to a session high near 4.47%, while the 30-year bond briefly poked above 5%.
The spread between five- and 30-year yields climbed to within a whisker of 100 basis points, a level it last closed above in 2021. A gauge of the dollar approached its lowest level since 2023.
“There is a general view that the curve should steepen” ahead of U.S. employment data due Friday that is followed by sales of 10- and 30-year Treasurys next week, said Tom di Galoma, managing director at Mischler Financial Group.
Even with the long-end back near 5% and around former cycle peaks of 2007, large bond investors generally remain underweight and favor owning shorter-dated areas of the market around the five-year sector.
“Our strongest conviction has been staying underweight long-term U.S. Treasurys,” BlackRock Investment Institute said in its latest weekly note.
Amid persistent deficits and sticky inflation, the asset manager is watching to see whether Congress passes a budget bill that could push the U.S. deficit higher, and “impact foreign investors and drive term premium even higher.”
The weakness in longer-dated bonds saw the 20-year yield briefly drop below that of the 30-year, the most in almost four years. Since Treasury revived 20-year bond sales, nearly five years ago, the benchmark has been unpopular among investors and traded at a discount with its yield above the 30-year.
“We can certainly see why the long end of safe haven curves are unloved,” said Rabobank strategists including Richard McGuire, adding the U.S. policy outlook is too cloudy to attract buyers for long-dated Treasuries.
That reflects the risk of further trade salvos from the U.S. president, after Trump announced he would be increasing tariffs on steel and aluminum to 50% from 25% to help protect American workers. He also said China had violated its trade agreement with the U.S.
“A buyers’ strike in bonds coupled with Monday’s inflation outlook means investors’ steepeners, a heavily subscribed trade since mid-April, has staying power,” according to Alyce Andres, MLIV Rates Strategist, Chicago
One of the Fed officials speaking on Monday, U.S. Chair Jerome Powell didn’t comment on the outlook for interest rates. Elsewhere, Chicago Fed President Austan Goolsbee said the central bank can proceed with interest-rate cuts if uncertainty around trade policy is resolved.
Speaking earlier, Dallas Fed President Lorie Logan said the U.S. central bank can remain patient as it assesses risks to both inflation and unemployment.
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