Federal Reserve policy expectations drive divergence in U.S. Treasury yields

As a series of major economic data releases approach, the U.S. bond market has experienced a noticeable adjustment. According to the latest quotes from Tradeweb, yields on U.S. Treasuries of all maturities have declined to varying degrees: the 2-year yield fell to 3.458%, down 1.4 basis points; the 10-year yield dropped to 4.141%, down 3.7 basis points; and the 30-year yield is at 4.823%, down 4.2 basis points.

Investor Sentiment Turns Conservative

Kudotrade analyst Konstantinos Chrysikos pointed out that market participants are currently adopting a cautious stance, waiting for the upcoming batch of economic data releases. This cautious sentiment is directly reflected in the movement of U.S. Treasury yields, especially with longer-term bonds experiencing more significant declines, indicating a reassessment by investors of the Federal Reserve’s future policy direction.

According to Odaily Planet Daily, during today’s European midday trading session, U.S. Treasury yields declined further, with market sensitivity to upcoming economic data significantly increasing.

Upcoming Economic Data Will Be Market Focus

The upcoming releases of the ISM Services PMI, ADP employment report, and JOLTS job openings data will become key points of market attention. These economic indicators will directly influence market perceptions of the Federal Reserve’s policy stance.

Based on LSEG’s currency market pricing data, investors currently expect the Federal Reserve to cut interest rates twice within this year. This expectation has directly impacted bond trading logic, with the decline in U.S. Treasury yields reflecting a market re-evaluation of rate cut expectations.