Investors anticipate Fed rate cuts, leading to strong performance in Treasury market

From Yahoo Finance: 2025-06-30 13:36:00

The US Treasury market had its best performance since February with yields near the lowest levels of the past month. Goldman Sachs economists predict earlier Federal Reserve interest-rate cuts, sparking broader bond market support. Despite uncertainties, investors are confident about at least two rate cuts by year-end. The June employment report is forecast to show growth easing, potentially impacting Fed decisions. Rates options trades suggest lower yields and faster Fed easing.

Investors are anticipating Fed rate cuts this year, with policymakers’ median forecast implying two quarter-point cuts. Yields remain range bound, trading above April lows. Bank of America predicts two-year yields at 3.75% by year-end. JPMorgan Chase expects 10-year yields to reach 4.35% by year-end. Investors are cautious about Fed possibly being behind the curve.

Disagreements among Fed officials increase the chance for a policy mistake. Some predict the 10-year yield ending at 4% this year and “closer to 3%” by 2026. Investors are wary of the range of outcomes in 2026. Fed officials have varying views on rate cuts this year, with some favoring two- and five-year notes in anticipation of more easing than expected.

Goldman Sachs revised their Fed rate cut prediction to September. Calendar-related bond index rebalancing could drive buying and market movement. Investors are closely watching the June employment report for potential market impact. Fed officials are monitoring inflation and job creation for potential easing decisions.

The Treasury market is positioned for potential rate cuts as early as July. Growth concerns and labor market weaknesses support the bid for duration. Yields are relatively range bound amidst economic uncertainties. Trade tensions are back in focus ahead of a tariff deadline. Fed officials are divided on rate cut timing and frequency.



Read more at Yahoo Finance: Treasuries Pad Monthly Gain Fueled by Fed Rate-Cut Expectations