US 10-Year Treasury Yield Near 15-Month Lows as Fed Rate Cut Decision Looms

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US 10-Year Treasury Yield Near 15-Month Lows as Fed Rate Cut Decision Looms

Team FS

18/Sep/2024

US 10-year Treasury yield held steady at 3.64%, close to 15-month lows, as investors prepare for a pivotal Federal Reserve rate cut decision.

Markets are split on the scale of the Fed's anticipated rate cut, with 65% odds now favoring a 50 basis point reduction, up from 25% last month.

Retail sales in the US unexpectedly rose by 0.1% in August, defying forecasts and building on a revised 1.1% increase in July, providing a boost to the benchmark yield.

The yield on the US 10-year Treasury remained around 3.64% on Wednesday, hovering near 15-month lows. This subdued trading level reflects investor caution as they await a significant upcoming decision from the Federal Reserve (Fed). The central bank is widely expected to cut interest rates for the first time in four years, a move that has led to increased market speculation.

Federal Reserve Rate Cut Anticipations

Market participants are keenly focused on the Fed’s monetary policy decision, with expectations for a rate cut growing. The likelihood of a substantial 50 basis point reduction has risen sharply, with current odds at 65%, a notable increase from 25% a month ago. This shift in expectations reflects heightened anticipation for more aggressive monetary easing.

Retail Sales Data Impact

The benchmark yield saw some movement on Tuesday, driven by a surprisingly strong US retail sales report. Retail sales unexpectedly increased by 0.1% in August, contrary to forecasts that had predicted a 0.2% decline. This uptick follows an upwardly revised 1.1% surge in July, indicating stronger-than-expected consumer spending and providing a temporary lift to the Treasury yield.

Market Outlook

As the Fed’s decision approaches, the market remains divided on the potential impact of the anticipated rate cut. The outcome of this decision will likely influence investor sentiment and could lead to further shifts in the Treasury yield. The reaction to the Fed's move will be closely watched for indications of future economic conditions and monetary policy directions.

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US 10-Year Treasury Yield Near 15-Month Lows as Fed Rate Cut Decision Looms

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