U.S. Treasuries Record First Monthly Loss of 2025 as Deficit Fears and Tariff Uncertainty Weigh on Market
U.S. government bonds ended May with their first monthly loss of 2025, a sharp reversal after months of steady performance.
According to a Bloomberg report, a mix of renewed tariff anxiety, political uncertainty in Washington, and mounting concerns over the national debt pushed investors to reassess their exposure to Treasuries across the curve.
The Bloomberg U.S. Treasury Index, which tracks all maturities, fell more than 1.2% during the month. Yields on the 30-year bond climbed for a third consecutive month, marking the longest streak of increases since 2023. The two- and 10-year yields also rose for the first time this year, signaling a broad-based shift in market dynamics.
The backdrop for the selloff included growing unease about the direction of fiscal policy. President Donald Trump’s renewed push for tax cuts, combined with a contentious negotiation process in Congress, reignited concerns about the U.S. budget deficit.
“There’s no market dislocation yet,” said Timothy Graf, head of EMEA macro strategy at State Street Markets, “but the deficit must be priced in.” Graf added that 5% remains a key target for the 10-year yield.
Despite the month’s bearish tone, Treasuries found brief support late in the week. On Friday, markets reacted to a social media post from Trump accusing China of breaching a tariff suspension deal. The renewed trade tension prompted a modest flight to safety, nudging bond prices higher.
Additional support came from soft April economic data. U.S. imports fell, consumer spending growth slowed, and inflation remained subdued, all of which reinforced expectations that the economy may be losing momentum. As a result, traders in money markets priced in around 50 basis points of Federal Reserve rate cuts by year-end.
While shorter-duration Treasuries stand to benefit from a more dovish Fed outlook, long-dated bonds face a tougher path ahead. A growing global supply of sovereign debt and sustained U.S. issuance are expected to maintain pressure on the long end of the curve.
As May closed, investors were left weighing a delicate balance: a softening economy that favors rate cuts, against a widening fiscal gap and policy volatility that clouds long-term bond prospects.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
