US Treasuries are facing their first monthly loss this year, with a Bloomberg index down over 1.2% in May due to increasing deficit concerns.
The poor performance is attributed to uncertainty surrounding tariffs and worries about the rising US budget deficit as the administration's policies impact investor confidence.
Shorter-dated maturities may benefit if signs of economic decline continue, but the outlook for long bonds is challenging with growing competition for safe assets globally.
Analysts predict a rise in term premium for 10-year US Treasuries and suggest positioning for steeper curves to hedge risks associated with lower yields.