The market is facing unprecedented policy uncertainty, highlighting the role of US Treasuries as a "stabilizing anchor."

Under the impact of the political storm in Washington, the bond market continues to remain stable. Currently, investors are still unclear how the employment policies of the federal government will change in the future, cannot predict whether President Trump will continue his tax cut policy from 2017, and are unsure how the tariffs policy towards major trading partners will adjust. The economic impact of these factors is difficult to estimate, making the interest rate trend, the most crucial factor influencing the bond market, even more unpredictable. Despite facing such high uncertainty, the volatility of the bond market remains at a low level. The 30-day moving average of the MOVE index (considered as the "fear index" of the bond market) is currently at 91.02, dropping to the lowest level in nearly three years. This index is used to measure the volatility of the bond market. Ian Lyngen, head of US interest rate strategy at BMO Capital Markets, said, "The low volatility of the bond market in the face of policy uncertainty indicates that the market is adopting a wait-and-see attitude, waiting for clearer guidance on Trump's policy direction." At the same time, bond prices continue to rise, pushing the yield of the 10-year US Treasury bond below its 100-day moving average (4.39%). On Wednesday, the yield briefly approached the 200-day moving average (4.24%), but slightly rebounded on Thursday morning. Typically, when the yield or price breaks through significant technical supports (such as moving averages), it often indicates that the market trend may continue. The main reasons for the decline in bond yields (i.e., rise in bond prices) include: strong demand for US Treasury bonds, with this week's auctions of 2-year, 5-year, and 7-year bonds performing well, showing continued investor interest in US bonds; stable long-term debt issuance ratio by the Treasury Department, with Treasury Secretary Janet Yellen stating that there will be no increase in the proportion of long-term debt in the total government debt issuance in the short term. If the government chooses to issue more long-term debt, it usually pushes up the yield of the 10-year Treasury bond, but this decision means that the yield will not temporarily rise due to increased supply; lowered expectations of economic growth, as reported by Morgan Stanley, due to market concerns that new tariff policies may undermine economic growth, hedge funds have generally decreased their expectations of economic growth, and a slowdown in economic growth typically puts downward pressure on bond yields. Strategist Matthew Hornbach from Morgan Stanley pointed out in a research report that if the market's expected lower limit of the federal funds rate drops to 3.4% (a level touched after the election), the yield of the 10-year US Treasury bond may further decline to 4.09%. Currently, the market broadly expects the Fed to lower the benchmark rate to 3.65% in the future, then begin raising rates. However, if the market's expectations for rates are further lowered, bond yields may have more room for further downward movement. The relative stability of the bond market contrasts sharply with the recent weakness in the stock market. The S&P 500 index has fallen for four consecutive trading days, with a slight rebound of 0.01% on Wednesday, but the overall trend remains weak. Since 2022, the bond market has no longer played the traditional safe-haven asset role, but from the current trend, it seems that the bond market is once again becoming the choice for investors to hedge against risk. Faced with policy uncertainty and the threat of slowing economic growth, the "safe haven" characteristics of the bond market may once again become evident. Despite unprecedented policy uncertainty in the market, the bond market remains relatively stable, reflecting investors' cautious attitude. Strong demand for government bonds, the Treasury Department's debt management policy, and the downward revision of economic growth expectations have all contributed to the decline in US bond yields. Meanwhile, the stock market is being pressured by negative sentiment, further highlighting the trend of safe-haven funds flowing into the bond market. If policy uncertainty persists, the "stable anchor" role of the bond market may become more apparent, and investors may continue to view US bonds as an important tool for hedging market risks.