Yields on US government debt are close to their lowest levels in months, after a rally spurred by haven demand amid stock-market jitters and last week’s tame January inflation reading. The bullish tilt suggests many investors expect ebbing price pressures will give officials room to slash borrowing costs later this year on any signs of labour-market weakness.
It’s not an outlook that Invesco, Carmignac and BNP Paribas SA share, however. As they see it, the economy looks too sturdy to build in much more Fed easing.
For one thing, January job growth beat projections. Meanwhile, companies are pouring money into the economy to invest in artificial intelligence. And minutes from the Fed’s last meeting showed policymakers appeared wary of lowering rates, with “several” suggesting hikes may be needed if inflation stays above the central bank’s 2% target.
Macro strategists at TS Lombard told clients this week to bet on fewer rate reductions in the second half of 2026. For Rob Waldner, fixed-income chief strategist at Invesco, the base case is one cut this year.
But it’s “increasingly likely there are no cuts” given the strength of recent economic data, he said. The firm, which manages more than $2.2 trillion, is underweight Treasuries given expectations for improving growth and above-target inflation. At Carmignac in Paris, Guillaume Rigeade has a similar view. He’s short US Treasuries and sees the 10-year yield drifting toward 4.5% in the coming months, the highest since mid-2025, from roughly 4.1% now. The rate, a benchmark for global borrowing, sank to about 4.02% on Tuesday, the lowest since November. “They will cut rates, but it is not justified by the inflation outlook and growth,” said Rigeade, co-head of fixed income at Carmignac, which manages about ₹41 billion ($48 billion).
Rigeade is looking in part to November’s US mid-term elections. With President Donald Trump’s job approval ratings waning, according to some polls, the administration may push for more spending to benefit households and businesses, adding to headwinds forbonds, the fund manager said.
Recent data has given both the bond bulls and bears something to point to. The headline annual consumer inflation figure of 2.4% for January week signaled cooling, but services prices accelerated.
