Treasury Market Turns Bearish as Tariff Ruling and Fed Risks Signal Sell-Off

Bearish momentum is returning to the $31 trillion Treasury market following a Supreme Court ruling against Trump-era tariffs and signs of economic resilience. Treasuries fell for the first time in a month as investors reassessed the outlook for government revenue and Federal Reserve policy. The Supreme Court decision to strike down global tariffs removes a key revenue source, potentially increasing the need for debt issuance to finance deficits. Concurrently, strong labor market data and elevated inflation have dampened rate-cut expectations. Fed minutes from January revealed some officials discussed tightening policy if price pressures persist. Strategists are responding with bearish positioning. BNP Paribas recommended clients bet on rising 10-year yields, while JPMorgan Chase advised shorting two-year notes, forecasting the Fed will remain on hold through 2026. The 10-year yield ended the week at 4.08%, with options market indicators suggesting the recent rally has peaked.