Bond Market Update

Rate Cut Bets Rising

• Recent action saw the long bond inch to a fresh session high while shorter tenors remain just below their best levels of the morning. Treasuries have had no trouble maintaining today's gains, which are following a big rally earlier this week. The breathless rally has the 2-yr yield down nearly 50 basis points from last week's settlement while the 10-yr yield is down 39 basis points for the week. Accordingly, the fed funds futures market is now pricing in bigger rate cuts, with the implied likelihood of a 50-bps decrease in September surging to 70.5% from 22.0% yesterday. Equities are fighting to stay above their morning lows with the S&P 500 (-2.2%) on course to surrender 2.5% for the week.
• Yield Check:
  • 2-yr: -25 bps to 3.91%
  • 3-yr: -24 bps to 3.73%
  • 5-yr: -20 bps to 3.65%
  • 10-yr: -17 bps to 3.81%
  • 30-yr: -16 bps to 4.11%