Why this analyst thinks US treasuries can rally in near term

Investing.com — U.S. Treasury yields may decline in the near term as economic data and Federal Reserve signals align to ease market pressures, according to analyst Adam Crisafulli.

Encouraging signs in inflation data, including cooling shelter costs, and a slowdown in labour market momentum could pave the way for a rally. December’s ADP jobs report showed a modest gain of 122,000 jobs, falling short of forecasts and signalling a broader labour market cooldown.

The Federal Reserve is unlikely to adopt a more hawkish stance soon, with market expectations for rate cuts later this year remaining modest.

Fiscal policy remains a concern, Crisafulli noted, as discussions on extending tax cuts and increasing spending could strain the deficit. However, a more balanced narrative from Washington in the coming months may provide some relief.

“Yields will stay a source of equity pressure going forward, but it’s likely Treasuries can rally from present levels in the near-term,” the analyst concluded.