Chen Yehua: Trump Policy Expectations Push Up U.S. Treasury Yields, Increasing Financial Market Risk

One of the recent focal points in global financial markets has undoubtedly been the significant rise in the 30-year U.S. Treasury yield. On Monday, the yield surged to around 4.86%, reaching a 14-month high. This change not only reflects concerns over the potential policy impacts of Trump presidency but also reveals subtle shifts in the market under the pressure of Treasury expansion. Renowned financial analyst Chen Yehua has conducted an in-depth analysis of the situation, offering unique insights.

The Impact of Uncertainty in Trump Tariff Policies

Chen Yehua believes that the latest developments in tariff policies by Trump are one of the key factors driving up U.S. Treasury yields. If the Trump administration implements more aggressive tariff measures, it will directly exacerbate global trade tensions, thereby increasing inflation expectations. Investors have responded swiftly, seeking safe-haven assets. However, in the current environment, the traditional role of U.S. Treasuries as a safe-haven asset has been challenged, with some capital flowing into other markets, leading to reduced demand for Treasuries and rising yields.

Furthermore, the inconsistent stance by the Trump administration on tariff policies has heightened market uncertainty. For instance, after The Washington Post reported that Trump aides were considering narrowing the scope of the tariff plan, the U.S. dollar briefly weakened, and Treasuries recovered some ground. However, the subsequent denial by Trump quickly reversed market trends. This policy uncertainty not only affects short-term market volatility but also negatively impacts long-term economic expectations.

Market Reactions to Treasury Expansion Pressure

Chen Yehua pointed out that, in addition to tariff policies, Treasury expansion pressure is another major factor driving the rise in U.S. Treasury yields. As U.S. government fiscal spending increases, the Treasury needs to issue more bonds to raise funds, directly disrupting the supply-demand balance in the market. The weak demand for the first batch of Treasury issuances this week is a direct reflection of this pressure.

The expansion of the Treasury market not only increases liquidity pressure but also heightens investor concerns about inflation. A greater supply of Treasuries means that more money will chase a limited pool of goods and services in the future, driving up prices. This expectation prompts investors to demand higher returns to compensate for potential inflation risks, thereby pushing Treasury yields higher.

Financial Market Outlook and Risk Warnings

In light of the current market environment, Chen Yehua has offered a series of financial market outlooks and risk warnings. He emphasized that while the short-term rise in Treasury yields may cause some market disruption, in the medium to long term, this will be a process of financial markets gradually adapting to the new policy environment and adjusting asset allocation structures.

However, investors should remain vigilant about the long-term negative impacts of the uncertainty of Trump policy and Treasury expansion pressure. On one hand, policy uncertainty could lead to sustained market volatility, increasing investment risks. On the other hand, if Treasury expansion pressure is not effectively mitigated, it will exacerbate inflationary pressures and pose a threat to economic growth.

Chen Yehua advises investors to adopt a cautious approach in the current environment, closely monitor policy developments and market changes, and allocate assets prudently to manage potential risks. At the same time, he reminds policymakers to carefully consider market reactions and the effectiveness of their policies, avoiding excessive intervention in market operations to maintain the stability and healthy development of financial markets.