The bond market is facing a multitude of risk factors, including threats to influence the Federal Reserve, a deepening federal budget deficit, and potential inflation from tariffs. Treasury yields are trading in a stable range, with the benchmark yield falling to 4.38%. Market-based inflation expectations remain moderate, with the inflation-indexed yield on a 5-year TIPS dropping to 1.46%. Despite concerns, investors seem optimistic that inflation will remain subdued for now. The calm in the bond market may be disrupted if President Trump follows through on raising tariffs on August 1, although markets are anticipating a possible delay. Bond and stock markets appear unfazed by tariff-related inflation, with investors focusing on potential future growth. The bond market may be more concerned about slowing growth rather than tariff-driven inflation, as indicated by the Conference Board’s outlook for economic growth to slow in 2025. Overall, tariff risk may be seen as a hindrance to growth rather than a source of inflation.

Read more at Investing.com: Have the Bond Vigilantes Dismissed Tariff-Inflation Risk?