US Markets
Tuesday, April 2nd, 2024 3:50 pm EDT
Key Points
- The 10-year Treasury note yield surged, indicating a reassessment by traders regarding the possibility of the Federal Reserve cutting rates in June.
- Benchmark rates increased, with the 10-year yield rising nearly 7 basis points to 4.397%, its highest level since November 28, while the 2-year Treasury note yield climbed by nearly 1 basis point to 4.726%.
- This movement followed the expansion of manufacturing in the U.S. for the first time in 17 months, as reported by the Institute for Supply Management. The ISM manufacturing index rose to 50.3, surpassing expectations and suggesting growth, influencing a decrease in the odds for a June rate cut based on fed futures trading, which dropped to about 58.8% from approximately 70% a week earlier.
The 10-year Treasury note yield surged on Tuesday, building on gains from the previous session, as traders reconsidered the likelihood of the Federal Reserve cutting rates in June. At nearly 7 basis points, the benchmark rate climbed to 4.397%, marking its highest level since November 28, while the 2-year Treasury note yield rose by almost 1 basis point to 4.726%. Notably, yields and prices move inversely, with each basis point representing a 0.01% change. This uptick in yields followed encouraging data released by the Institute for Supply Management (ISM) on Monday, revealing the first expansion in U.S. manufacturing in 17 months. The ISM manufacturing index surged to 50.3, surpassing the Dow Jones consensus estimate of 48.1 and indicating growth by measuring the percentage of companies reporting expansion versus contraction, with anything over 50 signaling growth.
Market sentiment regarding a potential rate cut in June shifted, with odds based on fed futures trading dropping to about 58.8% from approximately 70% a week earlier. The unexpected rebound in U.S. manufacturing growth was perceived as diminishing the likelihood of significant Fed rate cuts, as noted by Dutch bank ING in a research note. Despite leaving interest rates unchanged for the fifth consecutive time last month, the U.S. central bank reiterated its expectation of three quarter-percentage point cuts by year-end. Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities, emphasized the Fed’s cautious approach, suggesting that market pricing currently leans toward three cuts, potentially commencing in June, pending further data developments.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/04/02/us-treasury-yields-in-focus-as-investors-assess-economic-data.html
