"Countdown to 'Trump 2.0': 10-year Treasury yield expected to soar to 5%"

As the inauguration of US President-elect Donald Trump approaches, bond traders are preparing to deal with volatility in the US Treasury market, with options indicating that the US 10-year Treasury yield could spike to 5%, the highest level since October 2023. Amid steady economic growth in the US, people speculate that Trump's return to the White House will stimulate accelerated inflation and increased deficits, leading to a half-percent rise in the US 10-year Treasury yield over the past month, reaching nearly 4.7%. The issuance of a large amount of corporate bonds this week and a $119 billion US Treasury auction added upward pressure on yields. It is expected that the US government will issue more bonds in the coming weeks. Gargi Chaudhuri, Chief Investment and Portfolio Strategist for BlackRock Americas, said, "We need some certainty on the fiscal policy front, and as the inauguration takes place, we will hear more news on this front. The uncertainty surrounding the issuance of US Treasury bonds will make buyers hesitant." Traders expect the US 10-year Treasury yield to rise to 5%. Meanwhile, economic data such as job vacancies and service industry data released on Tuesday were more optimistic, delaying expectations for further Fed rate cuts to the second half of this year. In this background, investors are preparing for a significant rise in yields. Options data released by the Chicago Mercantile Exchange on Tuesday show a new trading target of reaching a 5% yield on the US 10-year Treasury bond by the end of February. This may just be the beginning: Padhraic Garvey, Global Head of Debt and Rate Strategy at ING, expects the US 10-year Treasury yield to be around 5.5% by the end of 2025, while Arif Husain of T. Rowe Price believes that a 6% yield is possible. As US Treasury yields have recently surged, it appears that short positions in the futures market are also increasing. Over the past 5 trading days, open interest in what are known as ultra 10-year US Treasury bond contracts has increased daily. Furthermore, in the past 9 trading days, open interest in long-term US Treasury futures contracts has increased on 8 trading days. An increase in open interest during a market sell-off period indicates that investors are increasing their bearish bets. Certainly, despite the steady rise in yields, some investors see opportunities at the start of the new trading year. The most recent client survey from JPMorgan Chase shows that long positions have reached their highest level in over a year, although short positions have also increased over the past week. According to the JPMorgan Chase client survey for the week ending January 6th, long positions increased by 8 percentage points, reaching the highest level since December 4, 2023, while short positions increased by 6 percentage points.