U.S. Treasury & De-Dollarization: Risks & Dynamics
- The Federal Reserve's future policy path is under scrutiny following the recent federal Open Market Committee (FOMC) meeting.Initial reactions pointed to a steeper yield curve and potentially lower...
- Bryan Jordan, chief strategist at Cycle Framework Insights, Inc., anticipates potential Fed rate cuts if the risks highlighted in the FOMC statement materialize.
- The U.S.10-year Treasury yields could dip to 4% if macroeconomic pressures mount.
Dive deep into the shifting financial landscape: This article explores the potential for Fed rate cuts and their impact on Treasury yields, offering insights into the complexities of de-dollarization. Experts analyze the risks and dynamics at play, revealing how economic pressures could push yields lower, affecting everything from global markets to commercial real estate. The piece unpacks the trend of de-dollarization, and how currencies like the Taiwanese dollar, Swiss franc, and others are gaining ground. News Directory 3 presents a clear view on the interplay of these forces and what they mean. Discover what’s next for investors in sectors like multi-family as the Fed navigates an uncertain future.
Fed Rate Cuts Loom as Treasury Yields Face De-Dollarization Risks?
Updated May 26, 2025
The Federal Reserve’s future policy path is under scrutiny following the recent federal Open Market Committee (FOMC) meeting.Initial reactions pointed to a steeper yield curve and potentially lower rates. Though, the broader implication suggests the Fed might revert to rate cuts if economic challenges intensify, especially concerning inflation risks and labor market weakness.
Bryan Jordan, chief strategist at Cycle Framework Insights, Inc., anticipates potential Fed rate cuts if the risks highlighted in the FOMC statement materialize. Jordan said the Fed historically prioritizes the labor market when unemployment and inflation rise concurrently, citing aggressive rate cuts in 1980, 1981, and 2008 as examples. He also recalled the 2019 rate cuts, which were partly triggered by trade policy uncertainty affecting business investment.
The U.S.10-year Treasury yields could dip to 4% if macroeconomic pressures mount. While the economy currently appears stable enough to maintain market rates in the short term, expectations are that the Fed will guide interest rates toward a 3% to 3.25% range. This could push the 10-year yield below 4%, a typical market response to recessionary concerns.
The U.S. Treasury market, while still a global benchmark, experienced volatility that briefly disrupted its safe-haven status. Investors typically seek Treasuries during uncertainty,but recent events turned safety trades into painful ones.As markets stabilize, future flights to government securities may not be as automatic.
Adding to the complexity is the de-dollarization trend. Currencies like the taiwanese dollar, Swiss franc, euro, and Japanese yen have gained against the dollar, while the Hong Kong dollar remains near its floor due to foreign exchange interventions. This trend poses a risk to U.S. Treasuries, potentially increasing yield volatility.
Recessionary signals traditionally drive yields lower as slowing growth eases inflationary pressures. While risk assets have shown resilience recently, defensive undertones persist. The expiration of a 90-day tariff pause could heighten recession risks, potentially pushing the U.S. 10-year yield below 4%. However, the current 50-basis-point swap spread suggests that a more substantial rate cut would be necessary for yields to decline substantially.
Uncertainty in the rates market has dampened commercial real estate (CRE) deal flow. Dean Dulchinos, head of real estate credit at ORIX USA, said continued higher rates will likely suppress new deal flow.He noted a slowdown in transaction volume after initial optimism for rate cuts in 2025 faded. Despite this, Dulchinos highlighted the multifamily sector’s resilience, noting its insulation from tariff impacts due to its lack of direct involvement in manufacturing or goods movement.
“Assuming the risks flagged in the statement come to fruition, it is likely that the FOMC’s next move will be to resume the rate cut cycle.”
“We at ORIX USA anticipate continued higher rates for longer will have a dampening effect on new deal flow.”
What’s next
the coming months will be crucial. With Treasury yields potentially declining and de-dollarization pressures ongoing,markets face a delicate balance. For CRE investors, opportunities in sectors like multifamily may offer stability, while broader economic trends will dictate the Fed’s next actions.