The high tariffs in the United States will soon take effect, reducing demand for hedging and pushing down US Treasury yields.

Due to the approaching deadline of the US tariff policy, investors' demand for safe-haven assets has increased, causing US treasury prices to rise in line with the rising trend in European bond prices. The yield on the US 10-year treasury bond has fallen by 4 basis points to 4.38%, the lowest level since July 11. Officials from the US and the EU are still in trade negotiations this week, with no breakthrough yet, increasing the risk of a 30% tariff coming into effect early next month. Kathleen Brooks, Research Director at XTB Limited, said: "Concerns about tariff risks and the August 1 deadline are exacerbating market risk aversion sentiment. This has led to a small reallocation of funds from the stock market to safer assets like government bonds." Longer-term bonds have seen a significant increase, with the yield on the US 30-year treasury bond falling by 4 basis points to 4.95%. Evelyne Gomez-Liechti, Multi-Asset Strategist at Societe Generale, said some investors may be unwinding trades that profit from the steepening yield curve. The yield on the US 2-year treasury bond has dropped by 2 basis points to 3.84%. Short-term bond yields are being supported as traders seek to hedge against the possibility of Trump firing Fed Chairman Powell, a strategy recently dubbed the "Powell hedge" strategy. The logic behind this move is that if a new Fed chairman is more inclined to cooperate with Trump's calls for rate cuts, short-term bond yields may fall on expectations of policy easing; whereas concerns about the weakening of central bank independence could raise long-term inflation expectations and thus push up long-term bond yields. Powell is scheduled to deliver the opening remarks at a Fed meeting on Tuesday and is not expected to comment on interest rate prospects before next week's policy decision. The swap market indicates that a rate cut next week is highly unlikely. Traders expect a total of 46 basis points in rate cuts by the end of the year, a forecast that has not changed significantly from last Friday.