US Treasury Market Risks Amid Bond Demand Shift

The US Treasury market is experiencing heightened risks as the term premium on 10-year Treasury notes reaches its highest level since last November, indicating investor concerns over rising yields and inflation. Bond investors are worried about the U.S. government's fiscal policies, with the national debt nearing $36 trillion and potential inflationary measures proposed by presidential candidates. The benchmark 10-year Treasury yield has surged above 4.2%, affecting stock market performance and raising concerns about future fiscal and monetary policies, particularly in light of the upcoming elections. Meanwhile, mutual funds in India are increasing their positions in long-term government bonds, anticipating potential interest rate cuts and capital gains as yields may decrease. This global bond market activity reflects broader economic uncertainties, including inflation pressures and fiscal challenges in the US, impacting both domestic and international financial markets.