Treasury Yields Edge Lower Amid Fed Cut Bets and Ahead of Key US Data

AsianForexHub Market Pulse

• Treasury yields moved marginally lower ahead of crucial US economic data.
• The 10-year yield fell to 4.08%; the 2-year yield dropped more than 1 basis point to 3.5%.
• Market expectation for a Fed rate cut next week is holding strong at 87%.
• Key releases this week include ADP employment, ISM Services PMI, and the PCE index.
• Data releases are critical as the Fed enters its pre-meeting blackout period.

U.S. Treasury yields were lower on Wednesday as investors await more economic data and continue to bet on an interest rate cut at the Federal Reserve’s meeting next week.

Analyze the real-time impact of Fed expectations on yields and currency movements.

At 5:24 a.m. ET, the benchmark 10-year Treasury yield was down less than a basis point to 4.08%, while the 30-year Treasury yield was little changed at 4.75%. The 2-year Treasury yield fell by more than 1 basis point to 3.5%.

One basis point is equal to 0.01% and yields and prices move in opposite directions.

Investors are looking ahead to a number of economic data releases this week, including the ADP employment data for November due to be released at 8:15 a.m. ET. The report is expected to show signs of a fairly stable labor market and influence the Fed’s monetary policy decision next week. The ISM Services PMI will also be released at 10 a.m. ET on Wednesday.

Other reports due to be released this week include the weekly initial jobless claims on Thursday and the delayed personal consumption expenditures (PCE) index for September on Friday.

Markets are widely expecting the Fed to cut interest rates at its impending Federal Open Market Committee meeting. Traders are currently pricing in an 87% chance of a quarter-point cut at the meeting from December 9-10, according to the CME’s FedWatch Tool. That’s down slightly from an 89% bet on Tuesday, but much higher than expectations of a cut were just two weeks ago.

Economic data is pivotal for investors this week as it will inform their outlook on interest rates while Fed officials are in a communications blackout period ahead of its meeting.

Track real-time moves across the yield curve and their implications for inflation.