The outlook for Treasury yields is clouded by several factors. The US Treasury Department recently issued its quarterly refunding statement, indicating stable auction sizes for the next few quarters. In response, Treasury yields slipped, with 10-year yields around 4.5% and 2-year yields at 4.28%. Historically, higher yields tend to correlate with lower stocks, as seen in 2022 when rising yields led to a nearly 20% drop in the S&P 500. Despite an increase in yields throughout 2023, equities also rose, particularly during the last quarter when the 10-year yield dropped by 0.5%. As yields hover around 4%, there is potential for momentum, but any significant rise could rekindle recession fears, negatively impacting stocks. Factors contributing to this uncertainty include the ongoing interest rate environment, persistent inflation, and geopolitical tensions affecting US imports, as well as leadership changes within the Treasury. The new Secretary, Scott Bessent, has expressed dissatisfaction with previous strategies. Overall, the future trajectory of Treasury yields remains ambiguous, with many variables at play.

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