Bond Market Update

Gains Fade

• Treasuries have moved off their best levels of the session, as stocks have rebounded from larger losses. The Russell 2000 (+0.1%), down 0.7% at one juncture, is back in positive territory.
• Seeing the front end outperform the back end today in what would be labeled a bull steepener trade that is often associated with a positive economic outlook because it is driven by expectations of lower interest rates that would be supportive for growth.
• The CME FedWatch Tool shows a 46.6% probability of a 25-basis-point rate cut in December. Granted, that is up from 42.4% yesterday, but it is far from a slam dunk in terms of the December meeting producing a rate cut. In effect, it suggests there is a higher probability of there not being a rate cut.
• Yield check:
  • 2-yr: -2 bps to 3.59%
  • 3-yr: -3 bps to 3.58%
  • 5-yr: -2 bps to 3.70%
  • 10-yr: -1 bp to 4.12%
  • 30-yr: unch at 4.74%