How a new report convinced Deutsche Bank it’s time to short the 10-year Treasury.

It’s coming up on a year since Donald Trump was elected president, and of all the asset moves since then, there’s one that stands out.

First, a quick review: since Nov. 4, 2024, the S&P 500 SPX has climbed 19%, gold GC00 has gained 46%, bitcoin BTCUSD has jumped 54% and the U.S. dollar DXY has fallen 4%. Maybe there are surprises there in terms of magnitude, but directionally, none of that should be a shock given the pro-crypto Trump’s preference for a weak dollar and a low-tax economy to run hot.

The surprise would be that U.S. Treasury bonds — here, measured by the futures contract on the 10-year Treasury note TY00 — have gained 2% in value. Norm breaking? Fed bashing? Deficit spending? No problem.

Now, Deutsche Bank interest-rate strategists have said it’s time to short the 10-year Treasury BX:TMUBMUSD10Y. They give a target of the yield hitting 4.45%, with a stop at 3.9%, versus Monday’s close of 4.11%. (Yields, as a reminder, run in the opposite direction to prices.)

Rates strategists led by Francis Yared cite one of the few datapoints that have emerged during the shutdown — the Fed’s survey of senior loan officers, or SLOOS as it’s called. Bank willingness to extend consumer loans rose — not by much, but to highest level since 2022. Even demand for mortgages grew, increasing for the first time since 2021.

“The results of the survey are particularly helpful in the context of the recent pressures on regional banks and the scarcity of economic data due to the U.S. government shutdown. The signal sent by the SLOOS is consistent with the top-down assessment that the U.S. should grow at or slightly below potential,” they said.

Usually, bonds do better when the economy is slowing down, if not outright falling into recession.

Heading into the survey, most data and events were conducive to increasing bearish duration risk, they said. The SLOOS was final confirmation.

The rates strategists didn’t extend an analysis into the implications for other assets. But yields rising would make the valuation argument against stocks even more compelling.

U.S. stock futures ES00 NQ00 pointed to a sharply lower start. Bitcoin BTCUSD was sliding. The dollar DXY inched higher.

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