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Ten-year Treasury yields rose 11 basis points to 4.19% on Wednesday, reaching their highest level in almost three months, as markets reassess their expectations for interest rates.
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There was no clear catalyst for Monday’s rise, but yields have been on an upward trend since the Federal Reserve cut rates for the first time in more than four years last month.
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Wall Street has dramatically scaled back its expectations for the Fed’s upcoming rate cuts.
Treasury yields rose the most in weeks on Monday as markets continued to recalibrate interest rate expectations while assessing the likelihood of a soft landing for the US economy.
The yield on ten-year government bonds stood at 4.19% on Monday afternoon, the highest level since the end of July. The 11 basis point, or 0.11 percentage point, increase was the biggest intraday gain since Oct. 4, when a stronger-than-expected jobs report eased fears of a recession on Wall Street.
There was no clear catalyst for Monday’s rise, but yields have been on an upward trend since the Federal Reserve cut rates for the first time in more than four years last month.
The Fed went on a rampage in September, cutting its policy rate by 50 basis points, while the unemployment rate rose worryingly.
The decision was controversial in some corners. Fed Governor Michelle Bowman favored a smaller cut, becoming the first Fed governor to disagree with an interest rate decision since 2005.
In the weeks since, economic data – including September’s inflation numbers – have generally delivered positive surprises, supporting Bowman’s view that the Fed can take it easy if it returns the fed funds rate to neutral levels. That data has also supported the stock market, which has soared to record after record in recent weeks.
Wall Street has dramatically scaled back its expectations for upcoming rate cuts. As of Monday, there was a 64% chance that the Fed would cut rates by a total of 50 basis points at its next two meetings, according to Federal Funds Futures trading data.
The markets see no chance of bigger cuts. A month ago the opposite was true; Subsequently, Wall Street saw no chance that the Fed would cut its policy rate by less than 50 basis points at the last two meetings of 2024.
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