US treasury yields drop as Trump raises concerns over impending recession

US Treasury yields fell on Monday after comments by US President Donald Trump on Sunday raised concerns about an impending US recession. 

In an interview, Trump declined to predict whether the US could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China, saying that "there is a period of transition". 

US Treasury Secretary Scott Bessent said on Friday that the US economy may slow as it transitions away from public spending towards more private spending, calling it a "detox period" needed to reach a more sustainable equilibrium. 

"If the occupant in the White House is himself not terribly optimistic about short-term growth expectations, why should the market be optimistic about it?" said Will Compernolle, macro strategist at FHN Financial. 

 

"If they are willing to look through what they see as short-term pain, the detox, then there's an even bigger risk that, after the detox, they don't really have the capability to stop a downturn before it's too late". 

The yield on benchmark US 10-year notes was last down 8.2 basis points on the day at 4.236 per cent. The 2-year note yield fell 7.3 basis points to 3.929 per cent. 

The spread between two-year and 10-year Treasury yields steepened by around one basis point to 31 basis points. 

A haphazard implementation of Trump's trade tariffs has increased uncertainty over when and how long levies may be in place, which has added to fears over how they may impact growth and inflation. 

Trump on Thursday suspended tariffs of 25 per cent he had imposed last week on most goods from Canada and Mexico. The exemptions for the two largest US trading partners expire on April 2. 

Federal Reserve Chair Jerome Powell, meanwhile, said on Friday that the US central bank is in no rush to resume interest rate cuts, with inflation still "somewhat above" the Fed's 2 per cent target. 

February's jobs report showed that US job growth picked up in February, though the share of workers holding multiple jobs was the highest since the Great Recession. 

This week's main economic focus will be consumer price inflation data for February, due on Wednesday, which follows a much hotter than expected report in January. Producer price data is scheduled for Thursday. 

The Treasury will sell $119 billion in coupon-bearing debt this week, including $58 billion in three-year notes on Tuesday, $39 billion in 10-year notes on Wednesday and $22 billion in 30-year bonds on Thursday.     

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