T-Yields struggle to hold firm amid rate cut speculations

US Treasury yields are attempting to hold firm in the face of expectations for interest rate cuts. Yields on US government bonds are trying to withstand the rising expectations of interest rate cuts next month, supported by optimism that has prevailed in the markets since the statements of Mary Daly, a member of the Federal Open Market Committee, who suggested that it is appropriate to start cutting interest rates at the next meeting.

Yields on 10-year US Treasury bonds rose to 3.818%, compared to the previous day’s close of 3.793%. Yields on this type of security had fallen to their lowest level on the trading day Monday at the daily closing level.

FOMC member, Mary Daly said on Monday, “It’s hard to imagine anything that could derail a rate cut in September.” She added in an interview with Bloomberg Economics, “I think it makes sense to change the direction of monetary policy. We don’t want to be in a situation where we have a tight monetary policy while the economy is showing signs of slowing.”

Daly avoided answering questions about the timing and size of future interest rate cuts, suggesting that it is “too early to know exactly what tools will be used” in the coming weeks.

She affirmed, “One thing we know for sure is that the future direction of interest rates is down.” There is an inverse relationship between expectations of interest rate cuts and US Treasury yields, which causes these yields to decline as expectations of interest rate cuts increase. However, optimism about future interest rate cuts has led to a breakdown of this relationship.