The rate on shorter-term debt is now tracking close to its lowest point in three years. It’s a sign that the bond market is readying for the Fed to take interest rates lower than previously expected.
The 2-year Treasury yield, which most closely follows expectations for interest rates, has declined 0.106 percentage points this morning to 3.485%. If it settles at this level, it would be the lowest yield since Sept. 7, 2022.
This price action follows an overall disappointing jobs report. It “will start the conversation about whether the FOMC should cut 50 [basis points] on September 17,” wrote Ian Lyngen, strategist at BMO Capital Markets. He is still predicting a 25 basis-point cut.