11 July 2024
Treasury yields experienced a significant decline following the release of favorable inflation data, which has increased market expectations for at least two Federal Reserve interest rate cuts in 2024. The drop in yields was observed across all maturities, with short-term rates particularly affected due to their sensitivity to Fed policy changes. Traders have now priced in a high probability of a rate cut in September, with some analysts predicting up to three cuts by year-end. This shift in market sentiment has led to a rally in Treasury bonds, potentially impacting upcoming auctions and reflecting growing investor confidence in a more dovish Fed stance in response to cooling inflation.