US treasuries are on track to post their first monthly loss of 2025, as concerns over the federal deficit and uncertain policy direction weigh on investor sentiment. According to a Bloomberg index tracking Treasury securities, bond prices have declined by more than 1.2% in May, reflecting renewed market pressure.

Yields rose across the curve in May, with the 30-year yield climbing for the third straight month, its longest streak of increases since 2023. Two-year and ten-year yields also rose for the first time this year, signaling a broad-based shift in expectations around US fiscal and monetary policy.

This performance reversal follows a relatively stable start to the year for treasuries and signals heightened investor sensitivity to emerging fiscal signals.

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Deficit fears resurface amid Trump tax proposal

Driving the recent market volatility are federal deficit fears, which reemerged after renewed political debate over tax policy. Former President Donald Trump is reportedly locked in negotiations with Congress over a proposed tax cut bill, raising alarms about a deepening fiscal imbalance.

Investors are increasingly wary that significant tax reductions, absent equivalent spending controls, could widen the deficit and trigger further bond sell-offs.

The broader US treasuries 2025 decline reflects what Bloomberg describes as an erosion of confidence tied to “unpredictable policies” from the current administration. Fiscal ambiguity, coupled with persistent inflation risks and political uncertainty, has pushed investors to reassess their exposure to long-term government debt.

Analysts warn that unless fiscal clarity improves, the Treasury market may face further headwinds in the months ahead.

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