US Treasuries appear largely unaffected by the trio of weak data (NFP, CPI and retail sales) released over the past two weeks. To be fair, there is a more discernible impact on the frontend of the UST curve. 2Y yields are now below 4.2%, off from close to 4.35% just a few weeks ago. The represents a meaningful paring of Fed hike bets. That said, the intraday moves last Friday leaves much to be desired. While 2Y USTs rallied in the immediate aftermath of the weak retail sales print (actual:-0.6% MoM sa, consensus: 0.1%). The gains faded and US yields ended the session higher. 



Duration worries are more acute in the longer-tenors with 10Y and 30Y yields still hovering around this year’s highs. This rise in nominal yields is not driven by Fed hikes expectations (which has been pared) and not driven by inflation worries (breakevens are lower now compared to the start of the year). This leaves term premium / real yield as the main culprit. Unfortunately, this variable is a catch-all and can reflect any combination of growth expectations, get impacted by crowding out from heavy AI-related issuances (this goes beyond hyperscaler capex needs and into chips and even infrastructure-related needs) and buoyant JGB and Bund yields. Moreover, rising real yields could also be a reflection of a further erosion of confidence in USTs. The rise in yields despite weakish data is a conundrum investors have to resolve.    

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