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(Seoul=Yonhap Infomax) Sung Jin Kim – US Treasury prices climbed for a third consecutive session, with mid- and long-term maturities leading gains.
Dovish signals from within the Federal Reserve have strengthened expectations for a rate cut at next month’s FOMC meeting, with the probability priced into futures markets now exceeding 80%. As the Fed’s “blackout period” begins on Saturday, dovish policymakers appear to be consolidating their position ahead of the policy decision.
According to Yonhap Infomax’s overseas rates intraday screen (screen no. 6532), as of 15:00 US Eastern Time on the 24th, the yield on the 10-year US Treasury stood at 4.0370%, down 2.60 basis points from the previous session’s close. This marks the lowest level for the 10-year yield since late last month.
The policy-sensitive 2-year yield fell 0.90 basis points to 3.5050% over the same period, while the 30-year yield, the longest maturity, dropped 3.80 basis points to 4.6770%.
The spread between the 10-year and 2-year yields narrowed slightly from 54.90 basis points to 53.20 basis points, reflecting a bull flattening of the curve. (Note: Bond prices and yields move inversely.)
After New York Fed President John Williams last week fueled expectations for a December rate cut, Governor Christopher Waller added his support on this day. Williams is considered the Fed’s de facto third-in-command, while Waller is both a potential future Fed Chair and a key market influencer within the central bank.
In an early morning interview with Fox Business, Waller stated, “My main concern regarding our dual mandate (price stability and full employment) is the labor market,” adding, “I support a rate cut at the next meeting.” He noted that “most of the private sector and anecdotal data we’ve received since the October meeting show virtually no change,” diagnosing the labor market as “weak and continuing to weaken.”
However, Waller cautioned that the January meeting could be “somewhat tricky due to a flood of data,” and warned that “if we suddenly see a rebound in inflation, jobs, or the economy, concerns about further rate cuts could arise.”
Andrew Brenner, head of international fixed income at NatAlliance, commented, “Despite key employment data being released only after the Fed meeting, the market is reassured that senior Fed officials still want a December rate cut.”
Waller’s remarks gave a strong boost to US equities, but Treasury yields continued to decline, with the 2-year yield finding support at the 3.50% level.
Shortly before 15:00, foreign media reported that San Francisco Fed President Mary Daly also voiced support for a December rate cut. Daly expressed concern that the labor market is “currently fragile enough to risk nonlinear changes,” while judging the risk of a sharp inflation spike as low.
The 2-year Treasury auction held in the afternoon saw solid demand, with yields set in line with market expectations. According to the US Treasury Department, the $69 billion 2-year note was awarded at a yield of 3.489%, down 1.5 basis points from last month’s auction and the lowest since August 2022. The bid-to-cover ratio rose to 2.68 from 2.59 previously, exceeding the six-month average (2.59). The awarded yield matched the when-issued yield, indicating the result was in line with market expectations.
According to CME FedWatch, as of 15:47 in New York, the federal funds rate futures market priced in an 85.1% probability of a 25 basis point rate cut at the Fed’s December meeting, up from 71.0% previously. The probability of rates being held steady fell to 14.9% from 29.0%.
sjkim@yna.co.kr
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Note: New York bond market prices in this article are as of 15:00 local time and may differ from closing prices. For official New York bond closing prices, refer to the '[US Treasury Yield Electronic Closing Prices]' article published at 07:30 AM.
Copyright © Yonhap Infomax Unauthorized reproduction and redistribution prohibited.