U.S. bond investors expect a Federal Reserve policy shift, with 10-year Treasury yields potentially falling below 4%
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U.S. bond investors expect a Federal Reserve policy shift, with 10-year Treasury yields potentially falling below 4%
According to Jinshi News, U.S. Treasury investors are beginning to bet that the Federal Reserve's policy focus will shift from curbing inflation to addressing slowing economic growth. Under this expectation, U.S. Treasuries have risen for six consecutive trading days, with yields falling to their lowest level of the year. Strategists at Morgan Stanley stated that if market expectations for Fed policy shift slightly, the 10-year Treasury yield could fall below 4%. Traders have revived expectations for two rate cuts by the Fed this year (25 basis points each), and anticipate further rate cuts next year bringing rates down to around 3.65%. The bank believes that if market expectations for interest rates drop to 3.25%, the 10-year Treasury yield could fall below 4%.
Navigating Web3 tides with focused insightsTechFlow news — On February 27, according to Jinshi News, U.S. Treasury investors are beginning to bet that the Federal Reserve's policy focus will shift from curbing inflation to addressing a slowdown in economic growth. Driven by this expectation, U.S. Treasuries have risen for six consecutive trading days, with yields falling to their lowest level of the year.
Strategists at Morgan Stanley said that if market expectations for Fed policy shift slightly, the 10-year Treasury yield could fall below 4%. Traders have now revived expectations for two rate cuts this year (each of 25 basis points) and anticipate further easing next year, bringing rates down to around 3.65%. The bank believes that if market-implied rates drop to 3.25%, the 10-year Treasury yield may fall below 4%.
Recent U.S. Treasury auctions have shown strong performance. Wednesday’s $44 billion seven-year note auction recorded a high yield of 4.194%, below the pre-auction market closing level of 4.203%, indicating stronger-than-expected demand. Analysts noted that investors see reasons for rate cuts not only in economic growth indicators but also in U.S. fiscal and immigration policies, including Trump’s threats to impose tariffs on major trading partners.
To date, U.S. Treasuries have gained 2.3% this year, outperforming the S&P 500’s 1.3% rise. Friday’s release of the January personal consumption expenditures (PCE) price index will likely be a key data point influencing market expectations.
