(Bloomberg) — The bond-market selloff unleashed by Donald Trump’s presidential victory last week ended almost as quickly as it began.

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Yet firms like BlackRock Inc., JPMorgan Chase & Co. and TCW Group Inc. have issued a steady drumbeat of warnings that the bumpy ride is likely far from over.

Trump’s coming return to the White House has significantly upended the outlook for the US Treasury market, where October’s losses had already wiped out much of this year’s gains.

Less than two months after the Federal Reserve started pulling interest rates back from a more than two-decade high, the likelihood that Trump will cut taxes and throw up large tariffs is threatening to rekindle inflation by raising import costs and pouring stimulus on an already strong economy.

His fiscal plans — unless offset by massive spending cuts — would also send the federal budget deficit surging. And that, in turn, has renewed doubts about whether bondholders will start demanding higher yields in return for absorbing an ever-rising supply of new Treasuries.

One scenario is “the bond market instills fiscal discipline with an unpleasant rise in rates,” said Janet Rilling, senior portfolio manager and the head of the Plus Fixed Income team at Allspring Global Investments.

She predicted the 10-year Treasury yield could rise back to the peak of 5% hit in late 2023, about 70 basis points above where it was Friday. That “was the cycle high and it’s a reasonable level if there is a full implementation of the proposed tariffs.”

There remains considerable uncertainty about the precise policies Trump will enact, and some of the potential impact has already been priced in, since speculators started betting on his victory well ahead of the vote. While 10- and 30-year Treasury yields surged Wednesday to the highest in months, they came tumbling back down again over the next two days, ending the week lower than they began.

There’s no cash Treasuries trading on Monday due to a US holiday.

But the prospect that Trump’s policies will spur growth has driven traders to pare back expectations for how deeply the the Fed will cut rates next year, dashing hopes that bonds would rally as it eased policy aggressively.

Economists at Goldman Sachs Group Inc., Barclays Plc and JPMorgan have shifted their Fed forecasts to show fewer reductions. Swaps traders are pricing in that policymakers will reduce its benchmark rate to 4% by mid-2025, a full percentage point higher than they were predicting in September. It’s in a range of 4.5% to 4.75% now.



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