Alice Gledhill and Sujata Rao

Fri, May 30, 2025, 2:56 PM3 min read

(Bloomberg) -- US Treasuries are delivering their first monthly loss this year, buffeted by renewed tariff uncertainty and growing anxiety over mounting levels of government debt.

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A Bloomberg index that tracks the bonds was down more than 1.2% in May through Thursday’s close after all maturities came under pressure. The 30-year yield rose for a third consecutive month, its longest losing streak since 2023, while yields on two- and 10-year tenors posted their first monthly increases of this year.

The poor monthly performance reflects the growing headwinds Treasuries face as the US administration’s unpredictable policies shake investor confidence. May saw a resurgence in worries over the US budget deficit as Donald Trump wrestles with Congress over a bill that promises to cut taxes.

“I don’t think there’s a dislocation in bond markets, but you do need to price for the deficit,” said Timothy Graf, head of EMEA macro strategy at State Street Markets in London. “We do still see 5% on 10 notes as the target here.”

Although Treasuries edged on Friday, the moves were small. Two-year yields slipped on the day by four basis points to 3.9% — still elevated compared to the 3.6% they ended with in April. Trump in a social media post on Friday said China violated an agreement to scale back tit-for-tat tariffs with the US, then expressed confidence a talk with Chinese President Xi Jinping could ease fresh trade tensions.

Economic data on the final trading day of the month also showed US imports fell in April, while consumer spending growth slowed and inflation remained tame. Money markets are pricing about 50 basis points of Federal Reserve interest-rate reductions by December.

Signs the economy is stumbling would support shorter-dated maturities in particular, which are more sensitive to Fed policy. The outlook for long bonds remains challenging, however, particularly given supply of safe assets globally is rising.

Goldman’s Waldron Says Bond Traders Fear Debt More Than Tariffs

Citigroup Inc. strategists including Dirk Willer see the term premium in 10-year US Treasuries — the extra return investors demand to own longer-term debt instead of a series of shorter ones — rising another 50 basis points in the next year as competition for buyers heats up. It rose to a decade-high earlier this month.