U.S. Treasury yields initially fell on Tuesday but later pared gains as investors assessed the implications of downgraded U.S. economic growth forecasts. The 10-year Treasury yield edged up slightly by 1 basis point to 4.464%, after earlier falling more than 4 basis points. The 30-year yield, however, dipped by 1 basis point to 4.985%. Yields, which move inversely to prices, reflected the uncertainty in the markets driven by economic projections and geopolitical tensions.
OECD Cuts U.S. and Global Growth Forecasts Amid Trade Barriers and Financial Uncertainty
Investor sentiment was heavily influenced by the Organization for Economic Co-operation and Development (OECD), which downgraded the U.S. economic growth forecast. The OECD now projects the U.S. economy will expand by just 1.6% in 2025 and by 1.5% in 2026, a marked decline from its previous forecast of 2.2% for 2025. This revision added to investor caution, especially considering the interconnected nature of global markets and the potential ripple effects of a slower U.S. economy.
Treasury Yields Fluctuate as OECD Slashes U.S. Growth Forecast and Global Trade Tensions MountThe OECD also downgraded its global economic outlook, attributing its concerns to rising trade barriers, tightening financial conditions, and increasing policy uncertainty. The organization warned that these factors, if persistent, would significantly hinder global growth. The report noted that declining business and consumer confidence could further weaken economic activity around the world, highlighting a growing trend of economic fragmentation and risk aversion.
Rising Trade Disputes Threaten Global Supply Chains and Strain Key International Economic Relationships
Trade tensions between the U.S. and China are escalating, adding further complications to the global economic environment. In response to U.S. accusations of breaching a temporary trade agreement, Beijing issued its own allegations against Washington. This exchange of blame points to a potential collapse in already fragile trade relations, sparking fears of retaliatory measures that could disrupt global supply chains and undermine investor confidence.
Meanwhile, the European Union voiced strong opposition to former President Trump’s proposal to double steel tariffs to 50%. The EU condemned the plan as harmful to ongoing trade negotiations and warned that it is ready to implement countermeasures. This response underscores a growing wave of protectionist policies and the mounting pressure on long-standing economic partnerships, raising the likelihood of an expanded trade conflict.
