(Bloomberg) — A two-month slump has all but wiped out the US Treasury market’s gains for the year, as traders brace for Donald Trump’s return and also the chance of slower interest-rate cuts from the Federal Reserve.

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A Bloomberg index of Treasury returns has seen its 2024 advance shrink to about 0.7% from a peak of 4.6% on Sept. 17, the day before the Fed reduced borrowing costs for the first time since 2020.

It marks a disappointing run of losses in the world’s biggest bond market, which has been battered by signs of a resilient US economy and the expectation that Trump’s election victory will usher in quicker inflation given his campaign promises such as steeper tariffs and lower taxes.

“The Treasuries market is struggling to find the North Star,” said Ed Al-Hussainy, a New York-based strategist at Columbia Threadneedle. “There are too many moving parts.”

Investors had anticipated that Fed easing would bring a windfall. Instead, 10-year yields have soared almost three quarters of a point since Sept. 18, marking the biggest jump in the first two months of a rate-cutting cycle since 1989.

Buyers Emerge

Buyers did step in on Friday as 10-year yields rose to 4.5% for the first time since May, showing some investors are holding out hope for a positive annual return in 2024.

Others may be reluctant to conclude that the market’s slide is over as doubts grow around how much further the Fed can drop rates. Next month’s decision is now seen as close to a coin flip after Fed Chair Jerome Powell said last week that the central bank isn’t “in a hurry” to cut.

It all leaves the market potentially in a state of limbo until the next round of crucial data, starting with the Fed’s preferred gauge of inflation at month-end, the first in a series of reports that may dictate what officials do in December.

Ten-year yields reached their peak last week on Friday after a solid report on retail sales. Bloomberg’s Economic Surprise Index jumped to the highest since February, signaling economic data are surpassing expectations.

Traders are now pricing in a total of about three quarters of a point of cuts over the next 12 months, roughly half of the easing reflected for that period back in September.

Following the selloff of the past couple months, the 10-year benchmark note “appears cheap,” but the valuation is still not compelling enough to present a buying opportunity, JPMorgan Chase & Co. strategists led by Jay Barry wrote in a note last week. They “prefer to be patient in fading these recent moves.”

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