TechFlow news, according to Jinshi Data, bond traders are increasingly betting that the U.S. economy is on the brink of deterioration and that the Federal Reserve will need to begin aggressively easing monetary policy to avoid a recession.
Previous concerns about high inflation have largely disappeared, rapidly giving way to new worries that the economy could stall unless the central bank starts cutting interest rates from their highest levels in over two decades.
This sentiment is driving one of the strongest rallies in the bond market since March 2023, when fears of a banking crisis first emerged. The rally has been so strong that the policy-sensitive two-year U.S. Treasury yield fell 50 basis points last week to below 3.9%.
The yield has not been this far below the Fed's benchmark rate—currently around 5.3%—since the global financial crisis and the dot-com bubble burst.
