The current U.S. bond market is fraught with risks. Although the sell-off following Trump's election victory is nearly over, major Wall Street firms like BlackRock and JP Morgan continue to issue warnings that this bumpy journey may be far from over.
As of Monday, the U.S. bond market has erased most of this year's gains, with some potential impacts of Trump's policies already priced in. Last Wednesday, the yields on 10-year and 30-year U.S. Treasuries soared to their highest levels in months, but fell back over the next two days, ending the week lower than at the beginning.
However, Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, has been warning investors:
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They should not expect bond prices to rise from now on; the recent rebound is an opportunity to lock in high yields on short-term bonds, and given the current uncertainty, a cautious approach to long-term debt is still warranted.
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Others also believe there is further downside potential in the U.S. bond market. Bob Michele, Chief Investment Officer of Asset Management at JP Morgan, warned that the yield on 10-year U.S. Treasuries could ultimately rise to 5% after Trump takes office. Vincent Mortier, Chief Investment Officer at Europe’s largest asset management company Amundi SA, also mentioned this, stating it is a &#34;real warning level&#34; that could spill over into the stock market, prompting investors to shift cash into bonds.
Pimco, a bond giant, recently stated that with Trump's victory, the U.S. stock market may experience a reversal after a sharp surge, and that risk assets should not be blindly optimistic.
It is worth mentioning that Trump's imminent return to the White House greatly disrupts the outlook for U.S. bonds.
Trump may cut taxes and impose high tariffs, which would raise import costs and inject more stimulus into an already strong economy, potentially reigniting inflation. His fiscal plans are also expected to lead to a surge in the federal budget deficit, with the Committee for a Responsible Federal Budget estimating last month that Trump's fiscal plans could increase debt by $7.75 trillion by fiscal year 2035.
Trump's various policy inclinations have raised doubts: will bondholders begin to demand higher yields to absorb the increasing supply of new government debt?

Trump is about to return to the White House, which greatly disrupts the outlook for U.S. Treasuries. Tax cuts, high tariffs, and fiscal plans will push up U.S. Treasury yields, with the 10-year yield potentially rising back to 5%

- The U.S. bond market faces significant risks as major firms like BlackRock and JPMorgan warn that recent volatility may continue.  
- Despite a brief recovery in bond prices, experts caution against expecting sustained increases, with predictions of 10-year Treasury yields potentially rising to 5% under Trump's policies.  
- Trump's return to the White House could lead to tax cuts and increased tariffs, raising inflation concerns and prompting bondholders to demand higher yields amid a growing supply of new debt.

Is a 5% yield on 10-year U.S. Treasuries not far off?