When the Federal Reserve initiated the process of cutting interest rates, there was an anticipation that treasury bond yields would decline and bond prices would ascend. However, yields have faced continuous pressure due to a multitude of factors. These include the possibility of a slowdown in the economy, which could lead to even lower inflation and more persistent market apprehensions regarding the federal deficit.

Chief Investment Officer's Perspective

Anne Walsh, the chief investment officer at Guggenheim Partners Investment Management, stated at CNBC's Delivering Alpha on Wednesday that the pressure on bonds could endure for several years. One of the seemingly certain bets when the Federal Reserve began lowering interest rates was that bond prices would rise while yields came under strain. But in reality, this has not unfolded as anticipated. The market, which has defied numerous historical patterns, has maintained the pressure on bond yields due to a variety of factors, with persistent concerns about the federal deficit being a significant one.Donald Trump's reelection as president has triggered a furious rally in stocks. According to some top institutional investors, his policies may reignite inflation, add to the deficit, and keep bond yields under pressure for an extended period. Anne Walsh shared this view at the CNBC's Delivering Alpha investor summit in New York City. She was surprised by the stock rally after the U.S. elections, a concern shared by other top investors at the summit like Nelson Peltz. However, her greater concern remains in the bond market.She mentioned that investors will be "more wary" given the election rally and the anticipation of tax cuts and regulatory changes and their potential impact on growth. In the bond market, investors should anticipate even more volatility. The bond market has been responding to reflationary concerns since tax cuts would contribute to the deficit. Even though the Fed has made progress in addressing inflation, the latest CPI data released on Wednesday showed a state of "stasis" in this regard.On Thursday morning, the 10-year treasury bond yield traded back near a session high of 4.483%, its highest level since July 1. Walsh said, "Volatility will be with us for a while." She expects the 10-year treasury to trade between 3.5% and 4.5% for "a while," perhaps a few years. She conceded that it is a somewhat contrarian call to anticipate that the yield pressure will persist for that long."That's the question for bond investors, not just the extension of tax cuts but new tax cuts and no offset with revenues," Walsh said. Hedge fund manager David Einhorn of Greenlight Capital stated at the summit that he has been increasing his bets on inflation due to Trump policy expectations.As CNBC Wealth Editor Robert Frank explained at the summit, the total cost of extending Trump's 2017 tax cuts and implementing new tax cuts based on campaign promises would amount to approximately $10 trillion in lost revenue. The biggest offset, Trump's tariff plans, is estimated to be around $3 trillion in revenue over ten years. Trump may not be able to persuade Congress to vote for a deficit-financed bill with all the tax cuts. But with a GOP expected to be even more compliant in his second term and a GOP sweep on Capitol Hill, as Rohit Kumar, the co-leader of PwC's national tax office and former deputy chief of staff to outgoing Senate Majority Leader Mitch McConnell, recently told CNBC, "The arc of history here reminds us that every time long-term deficit concerns come into conflict with near-term policy, near-term wins," Kumar said. "It's batting about 1.000."Walsh added that investors should expect elevated levels of fixed income volatility compared to equity volatility. They should also be aware of a worsening risk premium for stocks.