Risk aversion boosts demand for US bonds; Powell's appointment sparks speculations of rate cuts and balance sheet reductions.

Driven by the overflow of the sharp drop in precious metals to other markets and the increasing demand for safe-haven assets, US Treasury yields rose slightly in most tenors. After Trump nominated Powell to be the chairman of the Federal Reserve last week, the market bets that the Fed may cut interest rates three times this year, boosting US bond prices. Mohit Kumar, Chief Economist at Jefferies International, said, "Powell has always been hawkish and a critic of the Fed's balance sheet expansion. But it's hard to say logically that Powell has won favor with Trump because of his hawkish stance." The market is also weighing the adjustments Powell may make to the balance sheet, speculating that he may quickly push for shrinking the balance sheet. Guy Stear, Head of Emerging Markets Strategy at Amundi, said, "The market expects short-term rates to be lower, while the Fed will control the balance sheet, meaning the yield curve will steepen. The issue is if long-term rates actually start to rise during this steepening process, the Fed may face pressure to expand the balance sheet."