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Citigroup<\/a> Inc.\u2019s strategists have abandoned a once-popular \u201cTrump\u00a0trade<\/a>.\u201d\u00a0<\/p>\n The bank\u2019s global macro strategy team on Friday recommended clients exit any remaining bets that 30-year Treasuries will underperform five-year notes, after taking profit on half of the position earlier this month. The gap between five-year and 30-year yields has increased to 38 basis points, from around 20 basis points when Citigroup first recommended the trade.\u00a0<\/p>\n Strategists led by Dirk Willer touted the so-called curve steepener trade after President Joe Biden\u2019s poor debate performance in late June appeared to clear Donald Trump\u2019s path to retake the White House.<\/p>\n The former president\u2019s support for looser fiscal policy and steep tariffs are generally expected to deepen the federal deficit and fuel inflation, which would undermine longer-term bonds. The trade would also benefit from a Federal Reserve move to cut interest rates, leading shorter-maturity notes to outperform.<\/p>\n By Aug. 2, Willer and his colleagues were advising investors start trimming the position, after a surprising rise in unemployment sent five-year yields to the lowest since May 2023, a move the strategists deemed as excessive.<\/p>\n Citigroup unwound the remainder of the trade as Trump\u2019s odds of winning the Nov. 5 election in the betting market slipped following Kamala Harris\u2019s replacement of Biden as the Democratic nominee.\u00a0<\/p>\n This week\u2019s stronger-than-expected retail sales and lower-than-forecast jobless claims also suggest that Fed Chair Jerome Powell is less likely to signal aggressive policy easing at a symposium in Jackson Hole, Wyoming next week, according to the strategists. The rate market has fully priced in a quarter-point cut at the Fed\u2019s next policy meeting in September and a 16% of a chance for a jumbo half-point reduction.\u00a0<\/p>\n \u201cElection trades have disappeared from the field of vision of the market and will likely not come back prior to the September FOMC,\u201d Willer wrote in a note. \u201cThe combination of strong retail sales and lower claims means that Powell will be hard pressed to be more dovish than market pricing in the upcoming Jackson Hole meeting.\u201d<\/p>\n The Treasury yield curve typically steepens as the Fed starts to lower interest rates, leading policy-sensitive shorter-term bonds to outperform.<\/p>\n Willer said the steepener remains the \u201cright trade in the bigger picture,\u201d but it\u2019s costs about 12 basis points a month to hold the position. As a result, \u201cwe tactically take profits on this trade.\u201d<\/p>\n<\/div>\n\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n<\/div>\n