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Who Controls 10-Year Yields? The Market Has the Final Say, CIO Says Federal Reserve Chair Jerome Powell may find some relief in the Trump administration’s latest focus on 10-year Treasury yields rather than pressuring the Fed for rate cuts. However, this shift in strategy has sparked fresh concerns among market participants. Treasury Secretary Scott Bessent outlined the administration’s stance in interviews with Fox Business Network’s “Kudlow” program on Wednesday and Bloomberg Television on Thursday. Bessent emphasized that both he and Trump are concentrating on the 10-year Treasury yield (TMUBMUSD10Y 4.484%) rather than urging the Federal Reserve to cut interest rates. He also stated that the 10-year rate should decline “naturally” as a result of Trump’s economic policies. While this reassured some that the administration would not interfere with the Fed’s independence—particularly after Trump’s January 23 demand for immediate rate cuts—others raised concerns about obstacles that could prevent lower yields. These include the inflationary impact of tariffs and the projected $2 trillion U.S. budget deficit for the 2024 fiscal year, which signals continued heavy Treasury issuance. Mark Malek, Chief Investment Officer at New York-based wealth advisory firm Siebert, underscored a key point in an email: “Who is in control of 10-year yields? The answer is quite simple: THE MARKET. It is the market that has pushed 10-year yields higher recently. Bond vigilantes, if you will. These yields have risen due to expected inflation from trade frictions, increased deficit spending, and rising government debt.” The 10-year Treasury yield, a key benchmark for borrowing costs—including mortgages, auto loans, and student loans—has surged more than a full percentage point, reaching 4.802% on January 13, up from 3.622% on September 16. On Thursday, it settled just below 4.44% after a week of declines following Trump’s announcement of new tariffs on Mexico and Canada and subsequent delays. Malek acknowledged that the administration could theoretically drive yields lower by persuading the Fed to buy 10-year Treasury notes in the open market, a process known as yield-curve management. However, he considers such intervention unlikely. Historically, Japan employed yield-curve control until recently, targeting short-term rates near -0.1% and keeping its 10-year yield close to zero. Similarly, during and after World War II, the U.S. used yield-curve control from 1942 to 1951 to finance war debt. Another potential strategy, Malek noted, would be for the Treasury Department to repurchase long-term Treasurys while issuing short-term debt, akin to the Fed’s 2012 Operation Twist program. However, such moves are complex and may have limited long-term effectiveness. Despite Bessent’s comments, Thursday’s trading session showed a modest rise in Treasury yields across 2-year (TMUBMUSD02Y 4.275%), 10-year, and 30-year (TMUBMUSD30Y 4.692%) bonds, suggesting limited market reaction. Meanwhile, stock indices finished mixed, with the Dow Jones Industrial Average (-0.99%), S&P 500 (-0.95%), and Nasdaq Composite (-1.36%) posting declines. Gregory Faranello, Head of U.S. Rates Trading and Strategy at AmeriVet Securities, acknowledged that targeting longer-term rates to lower borrowing costs is a “sound” approach but emphasized the need for precision in execution. “In a nutshell, it is hard to have your cake and eat it too,” he said, noting that bond yields typically decline when tariff policies are softened. Faranello pointed out that with economic growth running above trend at 2% to 2.5% and inflation at 2.5% to 3%, there is limited room for rates to drop significantly. “If we can bring energy prices down, rates should follow on both the long and short ends,” he said. “That should be the real focus—energy prices, policy, and supply. But introducing other variables, like tariffs, complicates market interpretation.” The sheer volume of government debt issuance each month also makes it difficult to sustain lower rates, he added. While an Operation Twist-style program remains a possibility, Faranello questioned its effectiveness. “I’m not convinced it makes a ton of sense given its limitations and the relatively minor long-term impact of such operations. The biggest driver of interest rates remains inflation.” John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

New Tariffs Surpass First-Term Levels, Escalating Trade Tensions The U.S. will impose sweeping new tariffs starting Tuesday, with a 25% levy on imports from Canada and Mexico and an additional 10% on Chinese goods. The move significantly expands Trump-era trade policies, heightening tensions with key allies and rivals alike. To ease consumer impact, Canadian energy imports—including oil, gas, and electricity—will face a lower 10% tariff. However, Canada swiftly retaliated with matching 25% tariffs on $155 billion worth of U.S. goods, including alcohol and fruit. Mexico also announced countermeasures, while China condemned the move, promising legal action and further retaliation. President Trump signed the tariff orders on Saturday, tying their removal to resolving illegal immigration and drug trafficking concerns at U.S. borders. Critics Question Strategy as Markets React While some China hawks support the tough stance, critics argue that Trump’s approach lacks a clear strategy. “There’s no coherent plan on tariffs,” said Derek Scissors, a former Trump trade advisor and senior fellow at the American Enterprise Institute. “He’s winging it—misstating trade deficits and blaming Canada for fentanyl smuggling.” The markets reacted negatively, with the Dow dropping 0.8%, the S&P 500 down 0.5%, and the Nasdaq slipping 0.3%. “We expected tariffs—but not Canada and Mexico first,” wrote Chris Krueger, a policy strategist at TD Cowen. “The chaos premium is real.” Legal Challenges and Economic Uncertainty The tariffs will be enforced under the International Emergency Economic Powers Act, requiring a national emergency declaration. While legal challenges are expected, courts generally defer to the president on national security issues. Brad Setser, a former senior U.S. trade advisor, warned on X that these tariffs represent a “massive shock” to the U.S. economy, describing them as “a bigger move in one weekend than all of Trump’s first-term trade actions combined.” Despite Trump’s tough talk on China, Setser argues his policies suggest a different goal—redirecting Chinese demand toward U.S. goods rather than cutting ties. Trump’s unpredictable trade policies, including his reversal on banning TikTok, have left investors struggling to anticipate the next move. “Investors have whiplash,” said Tobin Marcus, head of U.S. policy at Wolfe Research. “It’s exhausting trying to plan beyond the next two days.” John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

IBM’s AI-Powered Consulting Growth Sparks Market Optimism IBM is making a comeback, and Wall Street is taking notice. Evercore ISI analyst Amit Daryanani sees a bright future for International Business Machines Corp. (IBM), following its latest earnings report. Investor enthusiasm has sent IBM’s stock soaring, making it the top performer in both the S&P 500 and the Dow Jones Industrial Average. The stock is on track for its best single-day gain ever. What’s driving this rally? Confidence in IBM’s consulting business. “We believe IBM’s unique position across software and consulting is starting to inflect higher, with AI and potential mergers & acquisitions acting as key catalysts,” Daryanani wrote. IBM’s software revenue jumped 11.5% on a currency-neutral basis last quarter, showing strong momentum. Although consulting revenue declined by 1%, the company expects growth to accelerate, backed by $5 billion in AI-related contracts that can be converted into sales. Shares of IBM surged 12.5% in afternoon trading, marking their biggest one-day gain since a 13% rise on July 20, 2000. IBM’s revenue grew just 1% last year, but the company is now targeting at least 5% growth in 2025 after currency adjustments. Ben Reitzes of Melius Research emphasized that consulting is playing a critical role in this turnaround. “Shifting consulting from a headwind to a tailwind—along with an expected boost from the mainframe cycle later this year—enabled IBM to project 5%+ constant currency revenue growth for 2025,” Reitzes wrote. “For long-time IBM watchers, this level of growth is rare.” And the outlook could improve further. Will next week’s analyst day reveal a roadmap for even faster expansion? “We believe IBM has the potential to accelerate from 5%+ to 7% growth over the next few years as it shifts further toward Red Hat and other high-growth software segments like HashiCorp and automation,” Reitzes added. Morgan Stanley’s Erik Woodring noted that IBM’s stock momentum suggests the market views the 2025 outlook as conservative, with room for upside in areas like organic software growth. “There’s also a belief that IBM could be gearing up for more M&A activity (which we agree with), potentially driving even stronger results in 2025,” Woodring wrote. “At this point, the burden is on the skeptics to explain why IBM’s momentum won’t continue beyond next week’s analyst day.” IBM’s AI-driven transformation is gaining traction, and investors are betting this is just the beginning. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com