US Treasury Yields Plunge Amid Surging Bets on Fed Rate Cuts

US Treasury bond yields have been on a downward trajectory since Wall Street opened for trading, fueled by growing anticipation that the Federal Reserve will slash interest rates at its next policy meeting. This shift reflects broader market confidence in an easing monetary policy, driven by recent economic indicators signaling a cooling economy.

The benchmark 10-year US Treasury yield dropped to 4.241%, down from the previous day’s close of 4.295%. During Wednesday’s session, yields briefly climbed to a high of 4.306% before retreating to a low of 4.228%, underscoring the volatility tied to evolving rate expectations.

In a bold statement on Wednesday, US Treasury Secretary Scott Bessent described current federal interest rates as “extremely tight” and advocated for a substantial reduction of 150 to 175 basis points. He highlighted the potential for an initial 50 basis point cut, followed by a series of adjustments aimed at lowering the benchmark rate from its current range of 4.25% to 4.50%, where it stands at 4.33%.

Markets are now fully pricing in a 50 basis point rate cut for September, a sentiment bolstered by last Tuesday’s consumer price inflation data, which revealed a notable slowdown in price growth. Adding to this momentum, the most recent US employment figures painted a picture of weakening labor market conditions, further justifying calls for the Federal Open Market Committee to initiate rate reductions in its upcoming gathering.