On Monday, US Treasury yields stayed mostly unchanged as investors digested the new tariff policies introduced by President Donald Trump. These tariffs impact major trading partners and could affect the global economy.
By 4:15 AM ET, the 10-year Treasury yield dipped slightly by just over one basis point to 4.5509%, while the 2-year yield rose by more than three basis points to 4.2759%. (Note: one basis point equals 0.01%, and yields and prices move in opposite directions.)
Investors are focusing on how these new tariffs will affect trade relations. On Saturday, Trump signed an executive order imposing a 25% tariff on imports from Mexico and Canada, and a 10% tariff on goods from China. The total trade with these three countries amounts to about $1.6 trillion.
Canada responded with threats of retaliatory tariffs, while Mexico also plans to impose tariffs on US goods, and China has filed a complaint with the World Trade Organization (WTO).
However, investors are also looking ahead to upcoming economic data. This week, reports on the manufacturing sector and labor market will be released. For example, on Monday, the US Manufacturing PMI and the ISM Manufacturing report will give insight into the sector’s performance.
On Tuesday, the Job Openings and Labor Turnover Survey will be announced, showing the number of job openings as of the last business day of the month. Investors will also be paying attention to speeches from the Presidents of the Federal Reserve Banks of Atlanta, Raphael Bostic, and San Francisco, Mary Daly.
The key event of the week will be the Nonfarm Payrolls report for January, released on Friday. This report will provide a clearer picture of the US job market for 2025. Economists expect 175,000 new jobs were created last month, with the unemployment rate likely remaining at 4.1%.
Investment Opportunities
- Manufacturing and Labor Market: Data from the PMI and ISM Manufacturing reports will offer key insights that could affect the outlook for the manufacturing sector and related industries. Investors might consider focusing on companies involved in manufacturing or logistics.
- Treasury Index and Bonds: With Treasury yields staying mostly steady, long-term bonds might be a good option for investors seeking stability, while the rise in the 2-year yield could offer higher return opportunities.
- Stocks of Companies Affected by Tariffs: Companies heavily involved in international trade (especially with Mexico, Canada, and China) will likely be impacted by these new tariffs. Analyzing the effects of tariffs on these sectors could uncover interesting investment opportunities.