Treasury Demand Shifts Amid Rising Borrowing Needs
The US Treasury market is undergoing changes in demand, with buyers becoming more price-sensitive due to evolving market dynamics. Despite this shift, Treasury yields are expected to remain elevated in the near term before gradually declining as inflation pressures ease.
The Federal Reserve's hawkish stance through 2026 is likely to persist due to persistent inflation, but easing services inflation and a cooling labor market may prevent further rate hikes.
A gradual decline in long-end yields is projected, influenced by heavy Treasury supply, geopolitical uncertainties, and record corporate borrowing linked to AI investments. Foreign demand for Treasuries has weakened, leading to increased reliance on domestic investment funds and leveraged investors.