FX.co ★ Treasuries Surge On Trump's Choice Of Bessent For Treasury Secretary

Following a modest uptick last Friday, treasuries experienced a notable increase in value during Monday's trading session.

Bond prices surged at the start and maintained their upward trajectory throughout the day. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, plummeted by 14.5 basis points to settle at 4.265 percent.

This rally in treasuries was triggered by the announcement that President-elect Donald Trump plans to nominate billionaire hedge fund manager Scott Bessent as Treasury Secretary. Bessent is known for his support for deficit reduction and has advised that Trump's proposed tariff increments be phased in gradually, potentially mitigating inflationary effects.

AJ Bell's investment director, Russ Mould, commented, "Scott Bessent is considered a stable and conventional choice, with less aggressive views on tariffs compared to some of Trump’s campaign rhetoric." He further remarked, "The reduction in bond yields following his nomination suggests a diminished concern regarding inflationary pressures from import tariffs, with Bessent potentially capable of addressing the U.S. deficit."

Adding to the positive sentiment, treasuries received additional support after the Treasury Department reported that this month's $69 billion auction of two-year notes attracted stronger-than-average demand. The auction resulted in a high yield of 4.274 percent and a bid-to-cover ratio of 2.77. For comparison, the past ten two-year note auctions had an average high yield of 2.61 percent. The bid-to-cover ratio, a key indicator of demand, reflects the number of bids received for every dollar of securities available.

Tuesday's trading might be influenced by market reactions to reports on new home sales and consumer confidence, along with the minutes from the latest Federal Reserve meeting.