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Source: Global Market Report

Citigroup strategists have abandoned the once-popular "Trump trade."

The bank’s global macro strategy team on Friday recommended that clients exit all bets that 30-year Treasurys underperform 5-year Treasurys. The gap between 5-year and 30-year yields has widened to 38 basis points from around 20 basis points when Citi first recommended the trade.

Citigroup strategists including Dirk Willer recommended trades betting on a steepening yield curve after Biden’s poor debate performance appeared to clear the way for Trump to return to the White House.

It is widely believed that the former president's support for looser fiscal policy and higher tariffs will further expand the federal deficit and push up inflation, which is bearish for long-term bonds, while the Fed's interest rate cuts will cause short-term bonds to outperform other maturities.

By Aug. 2, Willer and his colleagues were advising investors to start trimming their positions after an unexpected rise in U.S. unemployment sent the five-year yield to its lowest level since May 2023.